News Release

Cabot Oil & Gas Corporation Announces First Quarter 2015 Financial and Operating Results, Increases Borrowing Base and Amends Credit Facility
 

HOUSTON, April 24, 2015 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today reported its financial and operating results for the first quarter of 2015. Highlights for the quarter when compared to the first quarter of 2014 include:

  • Production of 171.4 billion cubic feet equivalent (Bcfe), an increase of 43 percent
  • Liquids production (crude oil/condensate/natural gas liquids) of 1.6 million barrels (Mmbbls), an increase of 132 percent
  • Total unit costs (including financing) of $2.33 per thousand cubic feet equivalent (Mcfe), a 12 percent improvement
  • Total cash unit costs (including financing) of $1.22 per Mcfe, a 10 percent improvement
  • Subsequent to the end of the first quarter, the Company closed an amendment to its revolving credit facility that increased the borrowing base to $3.4 billion; increased the lenders' commitments to $1.8 billion; extended the maturity date three additional years; and reduced the drawn and undrawn pricing based on current leverage levels. As of the end of the first quarter, the Company had $265 million of borrowings outstanding under its revolving credit facility

First Quarter 2015 Financial Results

Equivalent production in the first quarter of 2015 was 171.4 Bcfe, consisting of 161.8 billion cubic feet (Bcf) of natural gas and 1.6 Mmbbls of liquids. These figures represent increases of 43 percent, 40 percent, and 132 percent, respectively, compared to the first quarter of 2014. "Cabot delivered an impressive operational performance in the first quarter, highlighted by the 15 percent sequential growth in daily production volumes over the fourth quarter of last year," commented Dan O. Dinges, Chairman, President, and Chief Executive Officer. "Our robust production levels were predicated on higher base-load volumes in the Marcellus during the quarter driven by increased seasonal demand and favorable natural gas sales contracts for the winter heating season; however, as we have communicated in the past, our plan is to reduce production levels beginning in the second quarter in response to the current environment throughout Appalachia."

Cash flow from operations in the first quarter of 2015 was $267.4 million, compared to $255.4 million in the first quarter of 2014. Discretionary cash flow in the first quarter of 2015 was $240.2 million, compared to $319.5 million in the first quarter of 2014. Net income in the first quarter of 2015 was $40.3 million, or $0.10 per share, compared to $107.0 million, or $0.26 per share, in the first quarter of 2014. Excluding the effect of selected items (detailed in the table below), net income was $49.2 million, or $0.12 per share, in the first quarter of 2015, compared to $109.7 million, or $0.26 per share, in the first quarter of 2014. Significant reductions in realized prices for both natural gas and oil were the primary drivers for the lower results in the quarter, partially offset by higher equivalent production.

Natural gas price realizations, including the effect of hedges, were $2.46 per thousand cubic feet (Mcf) in the first quarter of 2015, down 34 percent compared to the first quarter of 2014. Excluding the impact of hedges, natural gas price realizations for the quarter were $2.23 per Mcf, representing a $0.75 discount to NYMEX settlement prices compared to a $0.59 discount in the first quarter of 2014. Oil price realizations were $43.82 per barrel (Bbl), down 55 percent compared to the first quarter of 2014.

Total per unit costs (including financing) decreased to $2.33 per Mcfe in the first quarter of 2015, an improvement of 12 percent from $2.66 per Mcfe in the first quarter of 2014. All operating expense categories decreased on a per unit basis relative to last year's comparable quarter except for transportation and gathering expense, which increased primarily as a result of slightly higher transportation rates and the commencement of various transportation and gathering agreements in the Marcellus Shale. Cash unit costs (including financing) decreased to $1.22 per Mcfe in the first quarter of 2015, an improvement of 10 percent from $1.35 per Mcfe in the first quarter of 2014.

Operational Highlights

Marcellus Shale

During the first quarter of 2015, the Company averaged 1,727 million cubic feet (Mmcf) per day of net Marcellus production, an increase of 43 percent over the prior year's comparable quarter and a 16 percent sequential increase over the fourth quarter of 2014. These production levels were primarily the result of an average gross operated Marcellus production rate of 2,018 Mmcf per day during the first quarter. Cabot plans to reduce its average gross operated Marcellus volumes in the second quarter of 2015 to between 1,550 and 1,600 Mmcf per day as the Company monitors the supply and demand balance in Appalachia.

"While pricing pressure remains a challenge for Marcellus gas in the near-term, Cabot's operating efficiencies in the play continue to exceed expectations," noted Dinges. During the quarter, Cabot drilled 26 wells to total depth in the Marcellus Shale and averaged 15.0 drilling days for spud-to-rig release, representing the Company's best quarter since inception of the program. Year-to-date, the Company's Marcellus Shale program has realized a 15 to 20 percent decrease in drilling and completion costs as compared to the 2014 program. 

Cabot is currently operating three rigs in the Marcellus Shale and plans to remain at this level for the remainder of the year.

Eagle Ford Shale

Cabot's net production in the Eagle Ford Shale during the first quarter of 2015 was 17,831 barrels of oil equivalent (Boe) per day, an increase of 145 percent over the prior year's comparable quarter. This included 17,017 barrels of liquids per day, an increase of 149 percent over the prior year's comparable quarter. "Our daily Eagle Ford Shale liquids production increased 19 percent sequentially over the fourth quarter of last year, driven by strong performance from the 20 wells that were placed-on-production during the quarter including six wells that were located on the acreage we acquired in 2014," explained Dinges. "These six wells, in addition to four wells we placed on production during the fourth quarter, have outperformed the previous operators' cumulative oil production at 30, 60 and 90 days by over 50 percent on average, highlighting the value-enhancing proposition of these bolt-on acquisitions."

Cabot's Eagle Ford Shale program continues to realize significant improvements in operating efficiencies and cost savings. During the quarter, Cabot drilled 24 wells in the Eagle Ford Shale to total depth and averaged 10.6 drilling days for spud-to-rig release, a 25 percent reduction compared to the 2014 program. On the completions side, the Company averaged 6.4 completed frac stages per crew day during the first quarter of 2015, an increase from 5.5 completed frac stages per crew day for the 2014 program. Year-to-date, the Company's Eagle Ford Shale program has realized a 20 to 30 percent decrease in drilling and completion costs as compared to the 2014 program.

Cabot is currently operating two rigs in the Eagle Ford Shale and plans to reduce to one rig by the end of May. 

Financial Position and Liquidity

As of March 31, 2015, the Company's net debt to adjusted capitalization ratio was 46.1 percent, compared to 44.7 percent at December 31, 2014 (detailed in the table below). The Company's total debt was $1,877 million, of which $265 million was outstanding under the Company's revolving credit facility.

Effective April 17, 2015, Cabot closed an amendment to its revolving credit facility that provides for, among other things: an increase in the borrowing base from $3.1 billion to $3.4 billion; an increase in the lenders' commitments from $1.4 billion to $1.8 billion; an extension of the maturity date three additional years to 2020; and a reduction in the drawn and undrawn pricing based on current leverage levels. A total of 20 lenders participated in the Company's facility.

Second Quarter and Full-Year 2015 Guidance

The Company has provided second quarter net production guidance of 1,375 to 1,425 Mmcf per day and 17,500 to 18,250 Bbls per day for natural gas and liquids, respectively. Cabot's full-year production growth guidance range of 10 to 18 percent remains unchanged. The Company expects its natural gas price realizations before the impact of hedges to average between $0.82 and $0.92 below NYMEX settlement prices for the second quarter.

Cabot's 2015 capital program remains unchanged at $900 million. As a result of a higher rig count and more completion activity during the first half of 2015, the Company estimates approximately 65 percent of its capital budget will be incurred in the first half of the year with the remaining 35 percent to be spent evenly between the third and fourth quarters.

For further disclosure on Cabot's natural gas pricing exposure by index for the second quarter of 2015 and updated unit cost guidance, please see the current Guidance slide in the Investor Relations section of the Company's website.

Conference Call

A conference call is scheduled for Friday, April 24, 2015, at 9:30 a.m. Eastern Time to discuss first quarter 2015 financial and operating results. To access the live audio webcast, please visit the Investor Relations section of the Company's website at www.cabotog.com. A replay of the call will also be available on the Company's website. The latest financial guidance, including the Company's hedge positions, is also available in the Investor Relations section of the Company's website.

Cabot Oil & Gas Corporation, headquartered in Houston, Texas is a leading independent natural gas producer, with its entire resource base located in the continental United States. For additional information, visit the Company's homepage at www.cabotog.com.

The statements regarding future financial performance and results and the other statements which are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, market factors, the market price (including regional basis differentials) of natural gas and oil, results of future drilling and marketing activity, future production and costs, and other factors detailed in the Company's Securities and Exchange Commission filings.

FOR MORE INFORMATION CONTACT
Matt Kerin (281) 589-4642
 

 

OPERATING DATA



Three Months Ended
 March 31,


2015


2014

PRODUCED NATURAL GAS (Bcf) & LIQUIDS (Mbbl)




Natural Gas




Appalachia

159.0



112.8


Other

2.8



3.0


Total

161.8



115.8






Crude/Condensate/NGL

1,594



686






Equivalent Production (Bcfe)

171.4



119.9






PRICES(1)




Average Produced Gas Sales Price ($/Mcf)




Appalachia

$

2.45



$

3.71


Other

$

2.98



$

4.97


Total

$

2.46



$

3.74






Average Crude/Condensate Price ($/Bbl)

$

43.82



$

97.76






WELLS DRILLED




Gross

43



27


Net

42



27


Gross success rate

100

%


100

%







(1) These realized prices include the realized impact of derivative instrument settlements.



Three Months Ended
 March 31,


2015


2014

Realized Impacts to Gas Pricing

$

0.23



$

(0.61)


Realized Impacts to Oil Pricing

$



$

(0.36)


 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)



Three Months Ended
 March 31,


2015


2014

OPERATING REVENUES




   Natural gas

$

360,191



$

432,809


   Crude oil and condensate

62,558



59,144


   Gain (loss) on derivative instruments

34,123




   Brokered natural gas

4,827



13,153


   Other

3,066



4,697



464,765



509,803


OPERATING EXPENSES




   Direct operations

36,017



35,834


   Transportation and gathering

121,235



77,765


   Brokered natural gas

3,739



11,860


   Taxes other than income

11,280



13,044


   Exploration

8,732



6,474


   Depreciation, depletion and amortization

175,497



147,418


General and administrative (excluding stock-based compensation)

16,619



18,465


Stock-based compensation(1)

5,910



3,171



379,029



314,031


Earnings (loss) on equity method investments

1,421




Gain (loss) on sale of assets

138



(1,285)


INCOME FROM OPERATIONS

87,295



194,487


Interest expense

23,566



16,557


Income before income taxes

63,729



177,930


Income tax expense

23,474



70,899


NET INCOME

$

40,255



$

107,031


Earnings per share - Basic

$

0.10



$

0.26


Weighted average common shares outstanding

413,344



416,900



(1) Includes the impact of the Company's performance share awards, restricted stock, stock appreciation rights and expense associated with the Supplemental Employee Incentive Plan.

 


CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

(In thousands)



March 31,
 2015


December 31,
 2014

Assets




Current assets

$

349,403



$

413,447


Properties and equipment, net (Successful efforts method)

5,058,804



4,925,711


Other assets

104,116



98,558


Total assets

$

5,512,323



$

5,437,716






Liabilities and Stockholders' Equity




Current liabilities

$

402,746



$

499,018


Long-term debt

1,877,000



1,752,000


Deferred income taxes

851,649



843,876


Other liabilities

205,397



200,089


Stockholders' equity

2,175,531



2,142,733


Total liabilities and stockholders' equity

$

5,512,323



$

5,437,716


 


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(In thousands)



Three Months Ended
 March 31,


2015


2014

Cash Flows From Operating Activities




Net income

$

40,255



$

107,031


Deferred income tax expense

15,081



57,603


(Gain) loss on sale of assets

(138)



1,285


Exploration expense

162



2,040


(Gain) loss on derivative instruments

3,562




Income charges not requiring cash

181,254



151,573


Changes in assets and liabilities

27,205



(64,154)


Net cash provided by operations

267,381



255,378






Cash Flows From Investing Activities




Capital expenditures

(395,242)



(338,701)


Proceeds from sale of assets

3,081



108


Restricted cash



8,382


Investment in equity method investments

(5,078)



(5,937)


Net cash used in investing

(397,239)



(336,148)






Cash Flows From Financing Activities




Net increase (decrease) in debt

125,000



75,000


Dividends paid

(8,263)



(8,332)


Stock-based compensation tax benefit

3,437



16,043


Other

2,678



90


Net cash provided by financing

122,852



82,801






Net (decrease) increase in cash and cash equivalents

$

(7,006)



$

2,031


 

Selected Item Review and Reconciliation of Net Income and Earnings Per Share

(In thousands, except per share amounts)



Three Months Ended
 March 31,


2015


2014

As reported - net income

$

40,255



$

107,031


Reversal of selected items, net of tax:




(Gain) loss on sale of assets

(87)



775


(Gain) loss on derivative instruments (1)

2,246




Drilling Rig Termination Fees

3,059




Stock-based compensation expense

3,726



1,913


Net income excluding selected items

$

49,199



$

109,719


As reported - earnings per share

$

0.10



$

0.26


Per share impact of reversing selected items

0.02




Earnings per share including reversal of selected items

$

0.12



$

0.26


Weighted average common shares outstanding

413,344



416,900



(1) Effective April 1, 2014, the Company elected to discontinue hedge accounting for its commodity derivatives on a prospective basis. This amount represents the non-cash mark-to-market changes of our commodity derivative instruments recorded in gain (loss) on derivative instruments in the Condensed Consolidated Statement of Operations.

 

Discretionary Cash Flow Calculation and Reconciliation

(In thousands)



Three Months Ended
 March 31,


2015


2014

Discretionary Cash Flow




As reported - net income

$

40,255



$

107,031


Plus (less):




Deferred income tax expense

15,081



57,603


(Gain) loss on sale of assets

(138)



1,285


Exploration expense

162



2,040


(Gain) loss on derivative instruments

3,562




Income charges not requiring cash

181,254



151,573


Discretionary Cash Flow

240,176



319,532


Changes in assets and liabilities

27,205



(64,154)


Net cash provided by operations

$

267,381



$

255,378


 


Net Debt Reconciliation

(In thousands)



March 31,
 2015


December 31,
 2014

Long-term debt

$

1,877,000



$

1,752,000


Stockholders' equity

2,175,531



2,142,733


Total Capitalization

$

4,052,531



$

3,894,733






Total debt

$

1,877,000



$

1,752,000


Less: Cash and cash equivalents

(13,948)



(20,954)


Net Debt

$

1,863,052



$

1,731,046






Net debt

$

1,863,052



$

1,731,046


Stockholders' equity

2,175,531



2,142,733


Total Adjusted Capitalization

$

4,038,583



$

3,873,779






Total debt to total capitalization ratio

46.3

%


45.0

%

Less: Impact of cash and cash equivalents

0.2

%


0.3

%

Net Debt to Adjusted Capitalization Ratio

46.1

%


44.7

%

 

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SOURCE Cabot Oil & Gas Corporation