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Cabot Oil & Gas Reports Record Second Quarter Financial Results
 

HOUSTON, July 28 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced record second quarter earnings and discretionary cash flow. Net income for the quarter rose 83 percent to $35.4 million, or $0.72 per share, versus $19.3 million, or $0.40 per share for the same period last year. In terms of cash flow, the Company reported cash flow from operations of $80.1 million compared to $45.7 million in last year's second quarter. Discretionary cash flow rose 32 percent to $79.6 million for the quarter. Before giving effect to the non-cash selected items related to the comparable second quarters, Cabot would have reported $33.0 million of net income, or $0.67 per share versus $19.8 million or $0.41 per share last year, still record performance levels (see Selected Items table for details). All information has been adjusted for the first quarter 2005 3-for-2 stock split.

The record financial results are attributable to higher realized commodity prices and improved production for the year-over-year quarterly comparison, the consecutive quarter periods and for the comparative year-to-date periods. Natural gas price realizations reached $6.02 per mcf for the 2005 second quarter, a 20 percent increase over last year's comparable period. Realized oil price quarterly comparisons were $43.76 per barrel for 2005 versus $31.10 per barrel for 2004. Production improvements were driven by results from the West region, where the Company experienced a nine percent increase between comparable quarters. Advances were also made in the East region with a five percent increase in equivalent production and to a lesser extent new production from Canada. This was offset by a four percent decline in the Gulf Coast region equivalent production.

"Cabot's financial metrics continue to improve as do the underlying operational prospects," stated Dan O. Dinges, Chairman, President and Chief Executive Officer. "We anticipate year-over-year production and reserve growth in 2005; the magnitude of any increases, however, will be impacted by timely execution of projects due to the up-tick of business in the service sector."

In regards to costs, the Company experienced upward pressure in several expense categories in the second quarter, the leader being "Taxes Other Than Income," which is substantially price driven, followed by higher DD&A, which is a function of the higher cost in the areas in which Cabot does business. Dinges added, "We continue to work hard to manage the cost creep (including goods and services, along with personnel costs) in our industry and its overall impact on our operating results."

Year-to-Date

For the first six months of 2005, Cabot Oil & Gas reported a new high for net income, cash flow from operations and discretionary cash flow. Reported numbers included: $56.2 million or $1.15 per share, for net income; $188.1 million for cash flow from operations; and $162.3 million for discretionary cash flow. Higher realized commodity prices and higher production drove the improvement.

At June 30, 2005, Cabot had long-term debt of $250 million and a positive working capital position of $14.7 million (which includes $51.9 million of cash and cash equivalents, and $20 million related to the current portion of long-term debt and $42.1 million of mark-to-market liability associated with unrealized derivative losses).

"With the inflationary pressure in drilling costs, accretive opportunities and our strong financial position, we have increased our capital program to $330 million from the original $280 million level," said Dinges. "This figure includes the increment required for the acquisitions disclosed in the Operations Update press release."

Late in the second quarter and early in the third quarter, the Company executed two hedges covering 2006 production. Both hedges were wide collars, one covering oil production and one covering natural gas production. The oil hedge consists of 1,000 barrels per day with a $50.00 floor and a $76.00 ceiling for all of 2006. The natural gas hedge is for 25,000 Mmbtu per day, with a floor of $7.00 per Mmbtu and a ceiling of $11.00 per Mmbtu. "These volumes represent only a small portion of the full year anticipated production total," added Dinges.

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2005 second quarter financial and operating results discussion with financial analysts on Friday, July 29, at 9:30 am EDT (8:30am CDT) at www.cabotog.com. A teleconference replay will also be available at (800) 642-1687, (U.S./Canada) or (706) 645-9291 (International), pass code 8037259. A replay will be available from Friday, July 29 through Friday, August 5, 2005. The latest financial guidance, including the Company's hedge positions, along with a replay of the web cast, which will be archived for one year, are available in the investor relations section of the Company's website at www.cabotog.com.

Cabot Oil & Gas Corporation, headquartered in Houston, Texas, is a leading independent natural gas producer with substantial interests in the Gulf Coast, including Texas and Louisiana; the West, including the Rocky Mountains and Mid-Continent; the East, with an expansion effort in Canada. For additional information, visit the Company's Internet homepage at www.cabotog.com.

Forward-Looking Statements

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.



                                OPERATING DATA

                                            Quarter Ended   Six Months Ended
                                               June 30,        June 30,
                                             2005    2004    2005    2004
        PRODUCED NATURAL GAS
         (Bcf) & OIL (MBbl)
        Natural Gas
          Gulf Coast                          7.3     7.6    14.7    15.2
          West                                5.7     5.2    11.4    10.8
          East                                5.1     4.9    10.2     9.3
          Canada                              0.3     ---     0.5     ---
          Total                              18.4    17.7    36.8    35.3

        Crude/Condensate/Ngl
          Gulf Coast                          421     455     827     948
          West                                 45      43      82      84
          East                                  8       7      13      13
          Canada                                5       0       9     ---
          Total                               479     505     931   1,045

        Equivalent Production (Bcfe)         21.3    20.7    42.4    41.6

        PRICES
        Average Produced Gas Sales Price
         ($/Mcf)
          Gulf Coast                        $6.14   $5.12   $6.09   $5.13
          West                              $5.47   $4.64   $5.10   $4.74
          East                              $6.54   $5.29   $6.44   $5.53
          Canada                            $4.53   $ ---   $4.95   $ ---
          Total                             $6.02   $5.02   $5.86   $5.12

        Crude/Condensate Price ($/Bbl)
          Gulf Coast                       $42.86  $30.43  $42.19  $30.57
          West                             $52.27  $37.37  $50.61  $35.89
          East                             $50.32  $36.41  $49.37  $34.17
          Canada                           $35.43  $  ---  $36.83  $  ---
          Total                            $43.76  $31.10  $42.96  $31.04

        WELLS DRILLED
          Gross                                97      92     141     130
          Net                                  77      84     105     113
          Gross Success Rate                   98%     97%     94%     98%



             CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
                      (In thousands, except per share amounts)

                                           Quarter Ended     Six Months Ended
                                             June 30,            June 30,
                                           2005     2004      2005      2004
       Operating Revenues
         Natural Gas Production (1)     $111,817  $90,028  $216,089  $180,407
         Brokered Natural Gas             15,520   15,628    42,012    47,187
         Crude Oil and Condensate (1)     23,936   13,552    35,914    26,319
         Other                               611      534     1,943     2,433
                                         151,884  119,742   295,958   256,346
       Operating Expenses
         Brokered Natural Gas Cost        13,701   13,596    36,999    42,317
         Direct Operations - Field and
          Pipeline                        14,307   13,114    28,925    25,192
         Exploration                      11,362    9,568    30,731    25,712
         Depreciation, Depletion and
          Amortization                    29,755   27,350    59,822    54,162
         General and Administrative
          (excluding Stock-based
             Compensation)                 7,168    6,935    15,093    13,180
         Stock-based Compensation (2)      1,532    2,647     2,567     3,118
         Taxes Other Than Income          12,396    9,921    22,114    20,023
                                          90,221   83,131   196,251   183,704
       Gain / (Loss) on Sale of Assets        59     (172)       59      (113)
       Income from Operations             61,722   36,439    99,766    72,529
       Interest Expense and Other          5,134    5,445    10,122    10,822
       Income Before Income Taxes         56,588   30,994    89,644    61,707
       Income Tax Expense                 21,166   11,676    33,460    23,378
       Net Income                        $35,422  $19,318   $56,184   $38,329
       Net Earnings Per Share -
        Basic  (3)                         $0.72    $0.40     $1.15     $0.79
       Average Common Shares
        Outstanding (3)                   48,917   48,789    48,821    48,693

     (1) See the "Impact of Mark-to-Market Accounting Requirements" table for
         additional information.
     (2) Includes the impact of the Company's performance share mark-to-market
         requirement and restricted stock amortization.
     (3) Reflects the 3-for-2 split of the Company's Common Stock on
         March 31, 2005.



                CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                  (In thousands)
                                           June 30,  December 31,
                                             2005        2004
       Assets
       Current Assets                      $207,400    $194,679
       Property, Equipment and
        Other Assets                      1,058,338   1,001,422
       Deferred Income Taxes                 14,680      14,855
          Total Assets                   $1,280,418  $1,210,956

       Liabilities and
        Stockholders' Equity
       Current Liabilities                 $192,732    $196,889
       Long-Term Debt                       250,000     250,000
       Deferred Income Taxes                259,701     247,376
       Other Liabilities                     62,165      61,029
       Stockholders' Equity                 515,820     455,662
          Total Liabilities and
           Stockholders' Equity          $1,280,418  $1,210,956


         CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
                               (In thousands)

                                   Quarter Ended         Six Months Ended
                                      June 30,               June 30,
                                  2005        2004        2005      2004
       Cash Flows From
        Operating Activities
       Net Income               $35,422     $19,318     $56,184   $38,329
       Change in Derivative
        Fair Value               (3,831)        653       3,681     6,272
       Income Charges Not
        Requiring Cash           30,679      27,808      62,669    54,883
       (Gain) / Loss on Sale of
        Assets                      (59)        172         (59)      113
       Deferred Income Tax
        Expense                   6,056       2,632       9,078     7,181
       Changes in Assets and
        Liabilities                 430     (14,420)     25,792    10,811
       Exploration Expense       11,362       9,568      30,731    25,712
       Net Cash Provided by
        Operations               80,059      45,731     188,076   143,301

       Cash Flows From
        Investing Activities
       Capital Expenditures     (74,778)    (66,719)   (115,848) (102,430)
       Proceeds from Sale of
        Assets                      122          22         710        22
       Exploration Expense      (11,362)     (9,568)    (30,731)  (25,712)
       Net Cash Used by
        Investing               (86,018)    (76,265)   (145,869) (128,120)

       Cash Flows From
        Financing Activities
       Sale of Common Stock
        Proceeds                    849       6,812       3,580    13,468
       Purchase of Treasury
        Stock                        --      (5,342)       (571)   (5,342)
       Dividends Paid            (1,957)     (1,306)     (3,296)   (2,602)
       Net Cash Provided /
        (Used) by Financing      (1,108)        164        (287)    5,524

       Net Increase /
        (Decrease) in Cash and
         Cash Equivalents       $(7,067)   $(30,370)    $41,920   $20,705



           Selected Item Review and Reconciliation of Net Income and
                              Earnings Per Share
                   (In thousands, except per share amounts)

                                     Quarter Ended      Six Months Ended
                                        June 30,            June 30,
                                     2005      2004      2005      2004
        As Reported - Net Income   $35,422   $19,318   $56,184   $38,329
        Reversal of Selected
         Items, Net of Tax:
         (Gain) / Loss on Sale of
          Assets                       (36)      107       (36)       70
         Change in Derivative
          Fair Value                (2,370)      404     2,277     3,882
        Net Income Including
         Reversal of Selected
         Items                     $33,016   $19,829   $58,425   $42,281
        As Reported - Net
         Earnings Per Share          $0.72     $0.40     $1.15     $0.79
        Per Share Impact of
         Reversing Selected Items    (0.05)     0.01      0.05      0.08
        Net Earnings Per Share
         Including Reversal
         of Selected Items           $0.67     $0.41     $1.20     $0.87
        Average Common Shares
         Outstanding                48,917    48,789    48,821    48,693



             Discretionary Cash Flow Calculation and Reconciliation
                               (In thousands)

                                     Quarter Ended      Six Months Ended
                                        June 30,            June 30,
                                     2005      2004      2005      2004
        Discretionary Cash Flow
        As Reported - Net Income   $35,422   $19,318   $56,184   $38,329
        Plus:
        Change in Derivative Fair
         Value                      (3,831)      653     3,681     6,272
        Income Charges Not
         Requiring Cash             30,679    27,808    62,669    54,883
        (Gain) / Loss on Sale of
         Assets                        (59)      172       (59)      113
        Deferred Income Tax
         Expense                     6,056     2,632     9,078     7,181
        Exploration Expense         11,362     9,568    30,731    25,712
        Discretionary Cash Flow     79,629    60,151   162,284   132,490
        Plus:  Changes in Assets
         and Liabilities               430   (14,420)   25,792    10,811
        Net Cash Provided by
         Operations                $80,059   $45,731  $188,076  $143,301


                     Net Debt Reconciliation
                         (In thousands)

                                   June 30,   December 31,
                                     2005        2004
        Current Portion of
         Long-Term Debt            $20,000     $20,000
        Long-Term Debt             250,000     250,000
             Total Debt           $270,000    $270,000
        Stockholders' Equity       515,820     455,662
             Total Capital        $785,820    $725,662

        Total Debt                $270,000    $270,000
        Less:  Cash and Cash
         Equivalents               (51,946)    (10,026)
             Net Debt             $218,054    $259,974

        Net Debt                  $218,054    $259,974
        Stockholders' Equity       515,820     455,662
             Total Adjusted
              Capital             $733,874    $715,636

       Total Debt to Total
        Capital Ratio                34.4%       37.2%
        Less:  Impact of Cash and
         Cash Equivalents             4.7%        0.9%
             Net Debt to
              Capitalization
              Ratio                  29.7%       36.3%



                  Impact of Mark-to-Market Accounting Requirements
                                   (In thousands)

                                         Quarter Ended       Six Months Ended
                                           June 30,              June 30,
                                       2005       2004       2005       2004
      Unrealized Gain / (Loss) on
       Derivatives (1)
         Natural Gas                    $782     $1,306       $222      $(418)
         Crude Oil                     3,049     (1,959)    (3,903)    (5,854)

      Incentive Stock Compensation
       Expense (2)
         Performance Shares              298     (1,781)      (114)    (1,781)
      Mark-to-Market Impact,
       Before Income Tax              $4,129    $(2,434)   $(3,795)   $(8,053)
      Mark-to-Market Impact,
       Income Tax                     (1,575)       927      1,447      3,068
      Mark-to-Market Impact on Net
       Income                         $2,554    $(1,507)   $(2,348)   $(4,985)

      (1) These amounts represent the unrealized loss associated with the
          mark-to-market valuation of open positions which do not qualify for
          hedge accounting or are ineffective. These amounts are reflected in
          the respective line items of Operating Revenues.  Therefore, the
          computation of our reported realized commodity prices can be
          obtained by adding the loss from the respective Operating Revenues
          line item and dividing by reported production.

      (2) This amount relates to the mark-to-market valuation of the Company's
          performance share incentive stock compensation awards that is
          reflected in general and administrative expense.  At June 30, 2005
          the Company recognized stock compensation expense based on Cabot's
          ranking against a predetermined peer group based on total
          shareholder return.  Cabot must calculate its liability at the
          balance sheet date under the assumption that its relative ranking
          remains constant throughout the measurement period, creating an
          assumed ultimate liability which is then amortized over the
          measurement period (percent payout multiplied by shares multiplied
          by stock price at reported balance sheet date multiplied by the
          pro-rata time expired in the measurement period).  Expense
          recognition will fluctuate between reporting periods due to the
          valuation of the performance shares at the reported balance sheet
          date.

SOURCE Cabot Oil & Gas Corporation
07/28/2005

CONTACT:
Scott Schroeder of Cabot Oil & Gas Corporation, 1-281-589-4993

1183 07/28/2005 18:30 EDT http://www.prnewswire.com