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Cabot Oil & Gas Corporation Announces Third Quarter 2014 Financial and Operating Results, Provides Update on 2015 Guidance and Share Repurchase Program
 

HOUSTON, Oct. 24, 2014 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today reported continued strong financial and operating results for the third quarter of 2014 including establishing new record highs for several key metrics. Highlights for the quarter include:

  • Production of 132.4 billion cubic feet equivalent (Bcfe), an increase of 24 percent over last year's comparable quarter
  • Liquids production (crude oil/condensate/natural gas liquids) of 961,000 barrels (Bbls), an increase of 7 percent over last year's comparable quarter as reported and an increase of 32 percent pro forma for last year's Mid-Continent and West Texas asset sales
  • Net income excluding selected items of $85.0 million, an increase of 14 percent over last year's comparable quarter
  • Cash flow from operations of $358.3 million, an increase of 29 percent over last year's comparable quarter
  • Total unit costs (including financing) of $2.53 per thousand cubic feet equivalent (Mcfe), a 15 percent improvement over last year's comparable quarter

Third Quarter 2014 Financial Results

"The results posted in the most recently completed quarter once again highlight the quality of our operations and assets," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "We made improvements in every key category, even in the face of strong headwinds."

Equivalent production in the third quarter of 2014 was 132.4 Bcfe, consisting of 126.7 billion cubic feet (Bcf) of natural gas and 961,000 Bbls of liquids. These figures represent increases of 24 percent, 25 percent, and 7 percent, respectively.

Net income in the third quarter of 2014 was $100.8 million, or $0.24 per share, compared to $69.9 million, or $0.17 per share, in the third quarter of 2013. Excluding the effect of selected items (detailed in the table below), net income was $85.0 million, or $0.20 per share, in the third quarter of 2014, compared to $74.6 million, or $0.18 per share, in the third quarter of 2013.

Cash flow from operations in the third quarter of 2014 was $358.3 million, compared to $276.7 million in the third quarter of 2013. Discretionary cash flow in the third quarter of 2014 was $296.0 million, compared to $282.3 million in the third quarter of 2013.

Natural gas price realizations, including the effect of hedges, were $3.06 per thousand cubic feet (Mcf) in the third quarter of 2014, down 9 percent compared to the third quarter of 2013. Excluding the impact of hedges, natural gas price realizations for the quarter were $2.92 per Mcf, representing a $1.14 discount to NYMEX settlement prices. Oil price realizations, including the effect of hedges, were $94.79 per Bbl, down 9 percent compared to the third quarter of 2013.

Total per unit costs (including financing) decreased to $2.53 per Mcfe in the third quarter of 2014, a 15 percent improvement compared to $2.98 per Mcfe in the third quarter of 2013. All operating expense categories decreased on a per unit basis relative to last year's comparable quarter except for transportation and gathering, which increased as a result of slightly higher transportation rates and the commencement of new transportation agreements, and exploration expense.

Year-To-Date 2014 Financial Results

"The year-to-date results set many records for a nine-month period including production, net income and cash flow from operations," remarked Dinges. "We continue to post our best results even in the face of a challenged commodity price environment."

Production during the nine-month period ended September 30, 2014 was 379.9 Bcfe, consisting of 364.3 Bcf of natural gas and 2.6 million Bbls of liquids. These figures represent increases of 30 percent, 31 percent, and 11 percent, respectively, compared to the nine-month period ended September 30, 2013.

For the nine-month period ended September 30, 2014, net income was $326.2 million, or $0.78 per share, compared to $201.8 million, or $0.48 per share, for the nine-month period ended September 30, 2013.  Excluding the effect of selected items (detailed in the table below), net income was $310.0 million, or $0.74 per share, compared to $223.8 million, or $0.53 per share, for the nine-month period ended September 30, 2013.

For the nine-month period ended September 30, 2014, cash flow from operations was $943.3 million, compared to $766.7 million for the nine-month period ended September 30, 2013. Discretionary cash flow was $947.8 million for the nine-month period ended September 30, 2014, compared to $813.7 million for the nine-month period ended September 30, 2013.

Operational Highlights

Marcellus Shale

During the third quarter of 2014, the Company averaged 1,298 million cubic feet (Mmcf) per day of net Marcellus production, an increase of 30 percent over the prior year's comparable quarter. "Our Marcellus volumes increased three percent sequentially relative to the second quarter and were slightly ahead of the guidance we provided a month ago," commented Dinges. "We continue to remain confident in our production outlook for the fourth quarter based on a robust schedule of wells to be placed on production between now and the end of the year."

Eagle Ford Shale

Cabot's net production in the Eagle Ford during the third quarter of 2014 was 10,347 barrels of oil equivalent (Boe) per day, an increase of 37 percent over the prior year's comparable quarter. This included 9,788 Bbls of liquids per day, an increase of 45 percent over the prior year's comparable quarter.

During the third quarter of 2014, Cabot placed 10 wells on production that have produced for at least 30 days, all of which were placed on production during the second half of the quarter. These wells achieved an average 30-day production rate of 751 Boe per day per well with a 91 percent oil cut. "Our oil production for the third quarter was relatively flat compared to the second quarter due to the timing of when our pads were placed on production during the quarter and downtime associated with well shut-ins for offset completions," stated Dinges. "We anticipate a meaningful ramp-up in oil production in the fourth quarter as we plan to place approximately 15 wells on production before year-end, with the majority of those wells coming online in December providing a strong exit rate for the year."

Earlier this year, Cabot initiated a 300-foot downspacing pilot program in the Eagle Ford, which has yielded encouraging results to date. The initial two wells in the pilot program have combined to produce approximately 230,000 Bbls of oil during the first 180 days of production. "We are pleased with the early results of our downspacing program and plan to test more 300-foot downspaced wells this year," noted Dinges. "Our Eagle Ford drilling inventory would increase to approximately 1,000 gross locations assuming the success of this program."

Financial Position and Liquidity

As of September 30, 2014, the Company's net debt to adjusted capitalization ratio was 35.5 percent, compared to 33.8 percent at December 31, 2013 (detailed in the table below). As of September 30, 2014, the Company had $1.4 billion available for future borrowings under its revolving credit facility and no borrowings outstanding.

Share Repurchase Program Update

Since the Company's last update, Cabot has repurchased an additional 1.6 million shares, for a total of 4.3 million shares repurchased year-to-date and 9.1 million shares repurchased since the fourth quarter of 2013. The Company has approximately 10.1 million shares remaining under its share repurchase program.

2015 Hedging Update

During the third quarter of 2014, Cabot added 20 natural gas derivative contracts for 2015. The Company now has approximately 194 Mmcf per day of natural gas volumes hedged for 2015 at a weighted average floor of $3.99 per Mcf.

2015 Guidance

The Company has reaffirmed its 2015 production growth guidance range of 20 to 30 percent. This production growth range is based on an average gross Marcellus production rate range of 1.8 to 2.0 Bcf per day and an average net liquids production range of 18,000 to 20,000 Bbls per day, of which approximately 88 percent is crude oil. The Company's capital budget for 2015 is $1.53 to $1.60 billion. Drilling and completion capital will account for $1.25 to $1.32 billion of the capital budget, with approximately 52 percent allocated to the Marcellus Shale, 46 percent allocated to the Eagle Ford Shale, and 2 percent allocated to other drilling areas. The capital budget assumes five operated rigs in the Marcellus Shale (down from the current level of six) and four operated rigs in the Eagle Ford Shale. The Company expects to drill 180 to 190 net wells in 2015, including 95 to 100 net wells in the Marcellus Shale and 80 to 85 net wells in the Eagle Ford Shale. The Company's budget for 2015 assumes commodity price realizations of $2.80 per Mcf for natural gas, which is slightly below Cabot's unhedged price realizations for the most recently completed quarter, and $88.00 per Bbl for oil.  Cabot's typical Marcellus Shale and Eagle Ford Shale wells generate rates of return greater than 80 percent and 60 percent, respectively, at the 2015 budget price realizations.

"This program demonstrates the quality of our assets with the ability to generate impressive production growth, cash flow growth and top-tier finding and development costs, all while maintaining an investment grade balance sheet despite the lower commodity price assumptions," said Dinges.

Conference Call

A conference call is scheduled for Friday, October 24, 2014, at 9:30 a.m. Eastern Time to discuss third quarter 2014 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



Quarter Ended
 September 30,


Nine Months Ended
 September 30,


2014


2013


2014


2013

PRODUCED NATURAL GAS (Bcf) & LIQUIDS (Mbbl)








Natural Gas








Appalachia

123.4


95.9


354.6


261.1

Other

3.3


5.8


9.7


16.4

Total

126.7


101.7


364.3


277.5









Crude/Condensate/NGL

961


898


2,608


2,352









Equivalent Production (Bcfe)

132.4


107.1


379.9


291.7









PRICES(1)








Average Produced Gas Sales Price ($/Mcf)








Appalachia

$

3.04


$

3.38


$

3.39


$

3.65

Other

$

3.86


$

3.09


$

4.48


$

3.06

Total

$

3.06


$

3.36


$

3.41


$

3.62









Average Crude/Condensate Price ($/Bbl)

$

94.79


$

103.76


$

97.05


$

103.07









WELLS DRILLED








Gross

49


51


125


134

Net

46


41


108


111

Gross success rate

98%


100%


99%


98%


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



Quarter Ended
 September 30,


Nine Months Ended
 September 30,


2014


2013


2014


2013

Realized Impacts to Gas Pricing

$

0.15


$

0.20


$

(0.24)


$

0.12

Realized Impacts to Oil Pricing

$

(0.04)


$

(1.33)


$

(0.57)


$

1.43

 


CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)



Quarter Ended
September 30,


Nine Months Ended
September 30,


2014


2013


2014


2013

OPERATING REVENUES








   Natural gas

$

347,970


$

341,901


$

1,218,540


$

1,004,085

   Crude oil and condensate

82,563


84,209


228,047


220,090

   Gain (loss) on derivative instruments

71,906



69,577


   Brokered natural gas

6,501


7,165


27,794


26,302

   Other

3,077


2,575


11,049


8,338


512,017


435,850


1,555,007


1,258,815

OPERATING EXPENSES








   Direct operations

37,802


32,923


109,241


101,398

   Transportation and gathering

85,966


60,803


247,707


159,672

   Brokered natural gas

5,680


5,913


24,570


21,006

   Taxes other than income

10,933


11,532


36,794


34,583

   Exploration

8,812


3,891


19,963


12,444

   Depreciation, depletion and amortization

154,013


168,980


458,995


469,022

General and administrative (excluding stock-based compensation)

13,901


12,448


46,219


41,048

Stock-based compensation(1)

5,678


12,249


15,123


40,961


322,785


308,739


958,612


880,134

Earnings (loss) on equity method investments

1,063


278


1,819


614

Gain (loss) on sale of assets

46


4,421


(2,735)


4,601

INCOME FROM OPERATIONS

190,341


131,810


595,479


383,896

Interest expense

17,422


16,074


50,312


49,366

Income before income taxes

172,919


115,736


545,167


334,530

Income tax expense

72,131


45,847


218,928


132,703

NET INCOME

$

100,788


$

69,889


$

326,239


$

201,827

Earnings per share - Basic

$

0.24


$

0.17


$

0.78


$

0.48

Weighted average common shares outstanding

416,173


420,986


416,785


420,664


____________________________________

(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)



September 30,
 2014


December 31,
 2013

Assets




Current assets

$

587,946


$

378,899

Properties and equipment, net (Successful efforts method)

5,130,213


4,546,227

Other assets

89,105


55,954

Total assets

$

5,807,264


$

4,981,080





Liabilities and Stockholders' Equity




Current liabilities

$

432,791


$

407,905

Long-term debt

1,612,000


1,147,000

Deferred income taxes

1,208,036


1,067,912

Other liabilities

187,966


153,661

Stockholders' equity

2,366,471


2,204,602

Total liabilities and stockholders' equity

$

5,807,264


$

4,981,080

 


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(In thousands)



Quarter Ended
September 30,


Nine Months Ended
September 30,


2014


2013


2014


2013

Cash Flows From Operating Activities








Net income

$

100,788


$

69,889


$

326,239


$

201,827

Deferred income tax expense

62,986


37,573


181,439


107,235

(Gain) loss on sale of assets

(46)


(4,421)


2,735


(4,601)

Exploration expense

4,300


1


6,454


807

Unrealized (gain) loss on derivative instruments

(31,833)



(44,766)


Income charges not requiring cash

159,755


179,234


475,677


508,473

Changes in assets and liabilities

62,352


(5,567)


(4,528)


(47,065)

Net cash provided by operations

358,302


276,709


943,250


766,676









Cash Flows From Investing Activities








Capital expenditures

(347,128)


(319,344)


(964,741)


(843,400)

Acquisitions

(15,826)


(128)


(15,826)


(128)

Proceeds from sale of assets

4,668


14,268


3,913


15,174

Restricted cash



28,094


Investment in equity method investments

(6,554)


(4,374)


(28,784)


(8,624)

Net cash used in investing

(364,840)


(309,578)


(977,344)


(836,978)









Cash Flows From Financing Activities








Net increase (decrease) in debt

419,000


20,000


465,000


75,000

Treasury stock repurchases

(119,767)



(119,767)


Dividends paid

(8,339)


(8,423)


(25,018)


(16,830)

Stock-based compensation tax benefit

(14,353)


1,936


6,001


9,284

Capitalized debt issuance costs

(5,626)



(5,626)


Other


11


91


44

Net cash provided by (used in) financing

270,915


13,524


320,681


67,498









Net increase (decrease) in cash and cash equivalents

$

264,377


$

(19,345)


$

286,587


$

(2,804)

 


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

(In thousands, except per share amounts)



Quarter Ended
September 30,


Nine Months Ended
September 30,


2014


2013


2014


2013

As reported - net income

$

100,788


$

69,889


$

326,239


$

201,827

Reversal of selected items, net of tax:








(Gain) loss on sale of assets

(28)


(2,670)


1,646


(2,776)

Unrealized (gain) loss on derivative instruments (1)

(19,154)



(26,936)


Stock-based compensation expense

3,416


7,397


9,100


24,712

Net income excluding selected items

$

85,022


$

74,616


$

310,049


$

223,763

As reported - earnings per share

$

0.24


$

0.17


$

0.78


$

0.48

Per share impact of reversing selected items

(0.04)


0.01


(0.04)


0.05

Earnings per share including reversal of selected items

$

0.20


$

0.18


$

0.74


$

0.53

Weighted average common shares outstanding

416,173


420,986


416,785


420,664


_____________________________

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

 

Discretionary Cash Flow Calculation and Reconciliation

(In thousands)



Quarter Ended
September 30,


Nine Months Ended
September 30,


2014


2013


2014


2013

Discretionary Cash Flow








As reported - net income

$

100,788


$

69,889


$

326,239


$

201,827

Plus (less):








Deferred income tax expense

62,986


37,573


181,439


107,235

(Gain) loss on sale of assets

(46)


(4,421)


2,735


(4,601)

Exploration expense

4,300


1


6,454


807

Unrealized (gain) loss on derivative instruments

(31,833)



(44,766)


Income charges not requiring cash

159,755


179,234


475,677


508,473

Discretionary Cash Flow

295,950


282,276


947,778


813,741

Changes in assets and liabilities

62,352


(5,567)


(4,528)


(47,065)

Net cash provided by operations

$

358,302


$

276,709


$

943,250


$

766,676

 

Net Debt Reconciliation

(In thousands)



September 30,
 2014


December 31,
 2013

Long-term debt

$

1,612,000


$

1,147,000

Stockholders' equity

2,366,471


2,204,602

Total Capitalization

$

3,978,471


$

3,351,602





Total debt

$

1,612,000


$

1,147,000

Less: Cash and cash equivalents

(309,987)


(23,400)

Net Debt

$

1,302,013


$

1,123,600





Net debt

$

1,302,013


$

1,123,600

Stockholders' equity

2,366,471


2,204,602

Total Adjusted Capitalization

$

3,668,484


$

3,328,202





Total debt to total capitalization ratio

40.5%


34.2%

Less: Impact of cash and cash equivalents

5.0%


0.4%

Net Debt to Adjusted Capitalization Ratio

35.5%


33.8%

 

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SOURCE Cabot Oil & Gas Corporation