News Release

Cabot Oil & Gas Corporation Announces First Quarter 2017 Results
 

HOUSTON, April 28, 2017 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) ("Cabot" or the "Company") today reported financial and operating results for the first quarter of 2017.  

First Quarter 2017 Highlights

  • Equivalent daily production growth of seven percent relative to the prior-year comparable quarter
  • Net income of $105.7 million compared to a net loss of $51.2 million in the prior-year comparable quarter
  • Cash flow from operating activities of $269.4 million, an increase of 301 percent relative to the prior-year comparable quarter
  • EBITDAX of $306.3 million, an increase of 202 percent relative to the prior-year comparable quarter
  • Generated positive free cash flow (cash flow from operating activities less capital expenditures) for the fourth consecutive quarter
  • Natural gas price realizations improved by 77 percent relative to the prior-year comparable quarter
  • Operating expenses per unit improved by 11 percent relative to the prior-year comparable quarter
  • Increased full-year 2017 production growth guidance range from 5 - 10 percent to 8 - 12 percent

"Our significant increase in net income and cash flow for the quarter highlights the impact of higher realized natural gas prices due to the recent tightening of the U.S. natural gas market," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Based on our improved outlook for natural gas price realizations throughout the year, we have increased our production guidance range to reflect our confidence in delivering a higher level of returns-focused growth in 2017."

First Quarter 2017 Financial Results

Equivalent production for the first quarter of 2017 was 170.1 billion cubic feet equivalent (Bcfe), consisting of 163.8 billion cubic feet (Bcf) of natural gas, 921.0 thousand barrels (Mbbls) of crude oil and condensate, and 123.5 Mbbls of natural gas liquids (NGLs). Equivalent daily production was in line with the high-end of the Company's guidance range for the quarter.

Net income for the first quarter of 2017 was $105.7 million, or $0.23 per share, compared to a net loss of $51.2 million, or $0.12 per share, for the first quarter of 2016. Excluding the effect of selected items (detailed in the table below), net income was $89.1 million, or $0.19 per share, compared to a net loss of $55.4 million, or $0.13 per share, for the first quarter of 2016. Cash flow from operating activities for the first quarter of 2017 was $269.4 million, compared to $67.1 million for the first quarter of 2016. Discretionary cash flow for the first quarter of 2017 was $273.0 million, compared to $71.2 million for the first quarter of 2016. EBITDAX for the first quarter of 2017 was $306.3 million, compared to $101.4 million for the first quarter of 2016. See the supplemental tables at the end of this press release for a reconciliation of non-GAAP measures including discretionary cash flow, net income (loss) excluding selected items, EBITDAX and net debt to adjusted capitalization ratio.

Natural gas price realizations, including the impact of derivatives, were $2.64 per thousand cubic feet (Mcf) for the first quarter of 2017, a 77 percent improvement compared to first quarter of 2016 and a 36 percent sequential improvement compared to the fourth quarter of 2016. Excluding the impact of derivatives, natural gas price realizations for the quarter were $2.65 per Mcf, representing a $0.67 discount to NYMEX settlement prices. Oil price realizations, including the impact of derivatives, were $46.73 per barrel (Bbl), an increase of 69 percent compared to the first quarter of 2016. NGL price realizations were $20.71 per Bbl, an increase of 187 percent compared to the first quarter of 2016.

Operating expenses (including financing) decreased to $2.01 per thousand cubic feet equivalent (Mcfe) in the first quarter of 2017, an 11 percent improvement compared to $2.26 per Mcfe in the first quarter of 2016. Cash operating expenses (excluding depreciation, depletion and amortization; stock-based compensation; exploratory dry hole cost; and amortization of debt issuance costs) decreased to $1.15 per Mcfe in the first quarter of 2017, a two percent improvement over the first quarter of 2016. All operating expense categories decreased on a per unit basis relative to last year's comparable quarter except for transportation and gathering, which increased primarily as a result of a charge associated with transportation expenses in the Eagle Ford, and taxes other than income, which increased primarily as a result of higher crude oil prices and the receipt of a production tax refund in the first quarter of 2016. The Company has reaffirmed its cost guidance for the full-year.

Cabot incurred a total of $212.2 million of capital expenditures during the first quarter of 2017 including $142.0 million of drilling and facilities capital associated with drilling 21 gross (21.0 net) wells and completing 25 gross (24.0 net) wells; $67.9 million of leasehold acquisition capital associated with grassroots leasing efforts, primarily in new exploratory operating areas; and $2.4 million of other capital. Additionally, the Company contributed $7.7 million to its equity pipeline investments in the Atlantic Sunrise and Constitution projects during the first quarter of 2017. "Recently, we have highlighted our plans to evaluate new platforms for future growth that generate competitive full-cycle returns," stated Dinges. "While this is not an easy task, we have identified two new exploratory areas where we have the potential to build sizable, contiguous acreage positions at a low cost of entry that have garnered investment capital in a similar manner as our Marcellus asset did over ten years ago." Added Dinges, "As we have demonstrated over the years, we will continue to remain disciplined with our capital as we assess these new opportunities."

See the supplemental table at the end of this press release reconciling the capital expenditures for the quarter.

First Quarter 2017 Operational Highlights

Marcellus Shale

During the first quarter of 2017, Cabot averaged 1,782 million cubic feet (Mmcf) per day of net Marcellus production (2,088 gross operated Mmcf per day), an increase of six percent sequentially compared to the fourth quarter of 2016. During the first quarter, the Company drilled and completed 14 net wells and placed 23 net wells on production. "20 of the wells placed on production during the quarter were completed with our fourth generation completion design and the average cumulative production for these wells is outperforming our 4.4 Bcf per 1,000 lateral feet type curve," commented Dinges.

Cabot's operating efficiencies in the Marcellus Shale continue to improve, highlighted by another record-low quarter for drilling costs per foot, which were 12 percent lower in the first quarter of 2017 as compared to the full-year 2016 average.

Cabot is currently operating two rigs and utilizing one 24-hour completion crew 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 2017 was 12,059 barrels of oil equivalent (Boe) per day (84% oil), an increase of 15 percent sequentially compared to the fourth quarter of 2016. During the first quarter, the Company drilled 7 net wells and completed and placed on production 10 net wells.

Cabot's operating efficiencies in the Eagle Ford Shale continue to improve, highlighted by another record-low quarter for drilling costs per foot, which were 13 percent lower in the first quarter of 2017 as compared to the full-year 2016 average.

Cabot is currently operating one rig and utilizing one completion crew in the Eagle Ford Shale and plans to remain at this level for the remainder of the year.

Financial Position and Liquidity

As of March 31, 2017, Cabot had total debt of $1.5 billion and cash on hand of $537.5 million. The Company's net debt to adjusted capitalization ratio and net debt to trailing twelve months EBITDAX ratio were 26.6 percent and 1.3x, respectively, compared to 28.5 percent and 1.8x as of December 31, 2016.

Effective April 11, 2017, Cabot's borrowing base was unanimously reaffirmed by its 20 lenders at $3.2 billion. Total commitments under the Company's credit facility remain unchanged at $1.8 billion, with approximately $1.7 billion currently available to Cabot. The Company currently has no debt outstanding under the credit facility, resulting in approximately $2.2 billion of liquidity. Cabot's next annual borrowing base redetermination is scheduled for April 2018.

Second Quarter and Full-Year 2017 Guidance Update

Cabot has provided second quarter 2017 net production guidance of 1,780 to 1,820 Mmcf per day for natural gas; 12,000 to 12,500 Bbls per day for crude oil and condensate; and 1,350 to 1,400 Bbls per day for NGLs.

Based on recent outperformance from its fourth generation Marcellus wells, coupled with an improving natural gas price outlook throughout Appalachia, the Company has increased its 2017 production growth guidance range from 5 - 10 percent to 8 - 12 percent. Additionally, the Company has increased its capital budget for the year to reflect an increase of up to $125 million for exploratory leasing and testing, resulting in full-year 2017 exploration and production (E&P) spending of up to $775 million (depending on the success of its exploratory activities). In addition, Cabot anticipates approximately $70 million of contributions to its equity pipeline investments resulting in total 2017 program spending of $845 million. Despite the increase in spending, the Company is currently forecasting over $250 million of positive free cash flow for the year based on recent Strip prices.

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

Conference Call Webcast and Supplemental Earnings Materials

A conference call is scheduled for Friday, April 28, 2017, at 9:30 a.m. Eastern Time to discuss first quarter 2017 financial and operating results. A supplemental presentation is also available in the Investor Relations section of the Company's website at www.cabotog.com. To access the live audio webcast, please visit the Investor Relations section of the Company's website. A replay of the call will also be available on 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 website at www.cabotog.com.

This press release includes forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The statements regarding future financial and operating performance and results, strategic pursuits and goals, market prices, future hedging and risk management activities, and other statements that are not historical facts contained in this report are forward-looking statements. The words "expect", "project", "estimate", "believe", "anticipate", "intend", "budget", "plan", "forecast", "predict", "may", "should", "could", "will" and similar expressions are also intended to identify forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, market factors, market prices (including geographic basis differentials) of natural gas and crude oil, results of future drilling and marketing activity, future production and costs, legislative and regulatory initiatives, electronic, cyber or physical security breaches and other factors detailed herein and in our other Securities and Exchange Commission (SEC) filings. See "Risk Factors" in Item 1A of the Form 10-K and subsequent public filings for additional information about these risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.  Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not undertake any obligation to correct or update any forward-looking statement, whether as the result of new information, future events or otherwise, except as required by applicable law.

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

 

OPERATING DATA



Three Months Ended
 March 31,


2017


2016

PRODUCTION VOLUMES




Natural gas (Bcf)

163.8



153.1


Crude oil and condensate (Mbbl)

921.0



1,109.6


Natural gas liquids (NGLs) (Mbbl)

123.5



92.1


Equivalent production (Bcfe)

170.1



160.3






AVERAGE SALES PRICE




Natural gas, including hedges ($/Mcf)

$

2.64



$

1.49


Natural gas, excluding hedges ($/Mcf)

$

2.65



$

1.49


Crude oil and condensate, including hedges ($/Bbl)

$

46.73



$

27.65


Crude oil and condensate, excluding hedges ($/Bbl)

$

46.68



$

27.65


NGL ($/Bbl)

$

20.71



$

7.22






AVERAGE UNIT COSTS ($/Mcfe)




Direct operations

$

0.14



$

0.16


Transportation and gathering

0.73



0.68


Taxes other than income

0.05



0.04


Exploration

0.04



0.04


Depreciation, depletion and amortization

0.79



1.01


General and administrative (excluding stock-based compensation)

0.09



0.11


Stock-based compensation

0.05



0.07


Interest expense

0.12



0.15



$

2.01



$

2.26










WELLS DRILLED (1)




Gross

21



10


Net

21.0



10.0






WELLS COMPLETED (1)




Gross

25



15


Net

24.0



15.0












(1) Wells drilled represents wells drilled to total depth during the period. Wells completed includes wells completed during the period, regardless of when they were drilled.


 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)




Three Months Ended
 March 31,

(In thousands, except per share amounts)


2017


2016

OPERATING REVENUES





   Natural gas


$

433,442



$

227,578


   Crude oil and condensate


42,990



30,676


   Gain on derivative instruments


33,384



18,994


   Brokered natural gas


4,695



3,180


   Other


3,332



1,513




517,843



281,941


OPERATING EXPENSES





Direct operations


24,641



26,035


Transportation and gathering


123,474



109,652


Brokered natural gas


4,046



2,566


Taxes other than income


9,058



5,994


Exploration


6,198



6,383


Depreciation, depletion and amortization


135,100



161,887


General and administrative (excluding stock-based compensation)


15,447



17,267


Stock-based compensation(1)


8,253



10,606




326,217



340,390


Earnings (loss) on equity method investments


(1,283)



2,009


Gain (loss) on sale of assets


(223)



1,354


INCOME (LOSS) FROM OPERATIONS


190,120



(55,086)


Interest expense


20,771



24,375


Other expense


424



503


Income (loss) before income taxes


168,925



(79,964)


Income tax expense (benefit)


63,205



(28,770)


NET INCOME (LOSS)


$

105,720



$

(51,194)


Earnings (loss) per share - Basic


$

0.23



$

(0.12)


Weighted-average common shares outstanding


465,348



431,841










(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,
 2017


December 31,
 2016

ASSETS




Current assets

$

748,313



$

715,881


Properties and equipment, net (Successful efforts method)

4,328,360



4,250,125


Other assets

167,715



156,563



$

5,244,388



$

5,122,569






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities

$

224,395



$

257,812


Long-term debt, net

1,520,870



1,520,530


Deferred income taxes

590,575



579,447


Other liabilities

201,369



197,113


Stockholders' equity

2,707,179



2,567,667



$

5,244,388



$

5,122,569



 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)



Three Months Ended
 March 31,

(In thousands)

2017


2016

CASH FLOWS FROM OPERATING ACTIVITIES




  Net income (loss)

$

105,720



$

(51,194)


Deferred income tax expense (benefit)

53,289



(28,973)


(Gain) loss on sale of assets

223



(1,354)


Exploratory dry hole cost

2,842




Gain on derivative instruments

(33,384)



(18,994)


Net cash paid in settlement of derivative instruments

(1,524)




Income charges not requiring cash

145,855



171,675


Changes in assets and liabilities

(3,643)



(4,048)


Net cash provided by operating activities

269,378



67,112






CASH FLOWS FROM INVESTING ACTIVITIES




Capital expenditures

(208,384)



(92,237)


Proceeds from sale of assets

374



49,828


Investment in equity method investments

(7,742)



(11,652)


Net cash used in investing activities

(215,752)



(54,061)






CASH FLOWS FROM FINANCING ACTIVITIES




Net borrowings (repayments) of debt



(413,000)


Sale of common stock, net



995,278


Dividends paid

(9,306)



(8,282)


Tax withholdings on stock award vestings

(5,414)



(5,022)


Capitalized debt issuance costs



(3,223)


Other

37




Net cash provided by (used in) financing activities

(14,683)



565,751






Net increase in cash and cash equivalents

$

38,943



$

578,802



 

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



Three Months Ended
 March 31,

(In thousands, except per share amounts)

2017


2016

As reported - net income (loss)

$

105,720



$

(51,194)


Reversal of selected items:




(Gain) loss on sale of assets

223



(1,354)


(Gain) loss on derivative instruments(1)

(34,908)



(18,994)


Drilling rig termination fees



3,188


Stock-based compensation expense

8,253



10,606


Tax effect on selected items

9,767



2,382


Net income (loss) excluding selected items

$

89,055



$

(55,366)


As reported - earnings (loss) per share

$

0.23



$

(0.12)


Per share impact of selected items

(0.04)



(0.01)


Earnings (loss) per share excluding selected items

$

0.19



$

(0.13)


Weighted-average common shares outstanding

465,348



431,841










(1) 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



Three Months Ended
 March 31,

(In thousands)

2017


2016

Net income (loss)

$

105,720



$

(51,194)


Plus (less):




Deferred income tax expense (benefit)

53,289



(28,973)


(Gain) loss on sale of assets

223



(1,354)


Exploratory dry hole cost

2,842




Gain on derivative instruments

(33,384)



(18,994)


Net cash paid in settlement of derivative instruments

(1,524)




Income charges not requiring cash

145,855



171,675


Discretionary cash flow

273,021



71,160


Changes in assets and liabilities

(3,643)



(4,048)


Net cash provided by operating activities

$

269,378



$

67,112



 

EBITDAX Calculation and Reconciliation



Three Months Ended
 March 31,

(In thousands)

2017


2016

Net income (loss)

$

105,720



$

(51,194)


Plus (less):




Interest expense

20,771



24,375


Other expense

424



503


Income tax expense (benefit)

63,205



(28,770)


Depreciation, depletion and amortization

135,100



161,887


Exploration

6,198



6,383


(Gain) loss on sale of assets

223



(1,354)


Non-cash (gain) loss on derivative instruments

(34,908)



(18,994)


(Earnings) loss on equity method investments

1,283



(2,009)


Stock-based compensation

8,253



10,606


EBITDAX

$

306,269



$

101,433



 

Net Debt Reconciliation


(In thousands)

March 31,
 2017


December 31,
 2016

Total debt

$

1,520,870



$

1,520,530


Stockholders' equity

2,707,179



2,567,667


Total capitalization

$

4,228,049



$

4,088,197






Total debt

$

1,520,870



$

1,520,530


Less: Cash and cash equivalents

(537,485)



(498,542)


Net debt

$

983,385



$

1,021,988






Net debt

$

983,385



$

1,021,988


Stockholders' equity

2,707,179



2,567,667


Total adjusted capitalization

$

3,690,564



$

3,589,655






Total debt to total capitalization ratio

36.0

%


37.2

%

Less: Impact of cash and cash equivalents

9.4

%


8.7

%

Net debt to adjusted capitalization ratio

26.6

%


28.5

%


 

Capital Expenditures




Three Months Ended
 March 31,

(In thousands)


2017


2016

Cash paid for capital expenditures


$

208,384



$

92,237


Change in accrued capital costs


6,695



(549)


Exploratory dry hole cost


(2,842)




Capital expenditures


$

212,237



$

91,688


 

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SOURCE Cabot Oil & Gas Corporation