Cabot Oil & Gas Announces Third Quarter Results

Oct 25, 2010, 18:01 ET from Cabot Oil & Gas Corporation

HOUSTON, Oct. 25 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced third quarter net income of $32.3 million, or $0.31 per share, as compared to net income of $42.6 million, or $0.41 per share, in the third quarter of 2009, excluding the selected items in both periods, (which are detailed in the Selected Items Table and include the impact related to the sale of assets, stock compensation, impairments and pension termination related expenses, along with derivatives). The 2010 quarter's reported net income was $3.9 million, or $0.04 per share, as compared to $38.9 million, or $0.38 per share, for the third quarter of 2009.

Cash flow from operations for the 2010 third quarter totaled $124.2 million, while discretionary cash flow was $133.1 million.  Comparatively, 2009 third quarter cash flow from operations was $116.7 million, and discretionary cash flow was $158.9 million.

Driving the results were lower natural gas realized prices offset by higher realized oil prices and higher equivalent production levels creating increased revenue for the quarter.  "Our third quarter production level of 36.0 Bcfe established a new high for quarterly reported production and was approximately 41 percent higher than the volumes reported in last year's third quarter.  Pennsylvania remains the focus of our capital program and is the key contributor to this production growth, as we wait for a backlog of Haynesville and Eagle Ford completions for both natural gas and oil," said Dan O. Dinges, Chairman, President and Chief Executive Officer.  In terms of pricing, realized natural gas prices were $5.37 per Mcf in the 2010 third quarter versus $7.40 per Mcf in the 2009 third quarter.  The 2009 quarter benefited from a significantly large hedge gain.  Realized oil prices for the period increased 12 percent to $98.26 per barrel over last year's third quarter.

During the third quarter, Cabot finalized its decision to terminate its pension plan and replace this plan with an enhancement to its 401(k) Plan.  The effective date of this termination was September 30, 2010; however, the regulatory process to liquidate the plan will take 12-18 months to complete.  "We have been evaluating this decision for many years and in light of the regulatory environment, we found a more cost effective way to deliver a similar benefit," stated Dinges.  

In terms of cost comparisons, the absolute levels rose with the largest increases occurring for an impairment and for DD&A; however, per unit levels for the recurring expenses improved significantly in this third quarter compared to last year. The impairment relates to two south Texas legacy fields that have seen limited activity.

Year-to-Date

The 2010 nine-month net income figure, after removal of the selected items, was $82.7 million, or $0.80 per share, versus $123.9 million, or $1.20 per share, for the nine-month period ended September 30, 2009.  In the nine months ended September 30, 2010, Cabot reported net income of $54.3 million, or $0.52 per share, compared to $112.0 million, or $1.08 per share, for the same period last year.  The cash flow comparisons for the nine months ended September 30, 2010 and September 30, 2009, respectively, are cash flow from operations of $367.5 million versus $417.1 million and discretionary cash flow of $374.2 million versus $430.6 million.

"The same dynamic that drove the quarter results apply to the year-to-date periods – increased production and lower natural gas price realizations," stated Dinges. "Production was up approximately 21.5 percent for the nine-month comparable periods while natural gas prices fell 22 percent and oil prices increased 18 percent." Per unit expenses, other than DD&A, were down between the year-to-date nine-month comparable periods with overall unit costs declining as well.

As previously announced during the quarter, Cabot increased its credit facility and extended the maturity date, creating additional flexibility and capacity to handle its debt maturity schedule. "We remain committed to our plans for a cash flow neutral program in 2011 while at the same time meeting our 2010 obligations, particularly in east Texas," added Dinges. "As I have stated before, we do not want to lose the long-term benefit of this large resource potential." Also of note, in the third quarter is $75 million of private placement notes are now treated as current liabilities with a required payment in July 2011.  

Conference Call

Listen in live to Cabot Oil & Gas Corporation's third quarter financial and operating results discussion with financial analysts on Tuesday, October 26, 2010 at 9:30 a.m. EDT (8:30 a.m. 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 15541524.  The replay will be available through Thursday, October 28, 2010.  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 its entire resource base located in the continental United States.  For additional information, visit the Company's Internet 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.

OPERATING DATA

Quarter Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

PRODUCED NATURAL GAS (Bcf) & OIL (MBbl)

Natural Gas

  North

23.7

12.2

55.2

34.8

  South

11.1

12.0

34.0

37.2

  Canada

-

-

-

1.0

  Total

34.8

24.2

89.2

73.0

Crude/Condensate/Ngl

  North

25.0

33.0

75.0

92.0

  South

170.0

198.0

585.0

526.0

  Canada

-

-

-

6.7

  Total

195.0

231.0

660.0

624.7

Equivalent Production (Bcfe)

36.0

25.5

93.2

76.7

PRICES

Average Produced Gas Sales Price ($/Mcf)

  North

$

4.56

$

6.28

$

4.80

$

6.56

  South

$

7.10

$

8.53

$

7.29

$

8.25

  Canada

$

-

$

-

$

-

$

3.56

  Total (1)

$

5.37

$

7.40

$

5.75

$

7.39

Average Crude/Condensate Price ($/Bbl)

  North

$

67.15

$

58.49

$

67.47

$

48.22

  South

$

102.43

$

92.12

$

101.28

$

88.75

  Canada

$

-

$

-

$

-

$

33.97

  Total (1)

$

98.26

$

87.49

$

97.43

$

82.48

WELLS DRILLED

 Gross

38

37

83

119

 Net

26

32

67

97

 Gross Success Rate

97%

97%

98%

98%

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

Quarter Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

    Realized Impacts to Gas Pricing

$   1.13

$   4.25

$   1.23

$   3.91

    Realized Impacts to Oil Pricing

$ 26.33

$ 23.40

$ 23.42

$ 30.64

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

Quarter Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

Operating Revenues

  Natural Gas Production

$   187,094

$   177,807

$   512,936

$     538,542

  Brokered Natural Gas

11,675

9,032

49,896

54,117

  Crude Oil and Condensate

19,234

19,574

60,427

50,026

  Other

1,127

608

3,901

3,099

219,130

207,021

627,160

645,784

Operating Expenses

  Brokered Natural Gas Cost

10,281

7,786

43,342

48,219

  Direct Operations - Field and Pipeline

26,466

23,012

73,796

71,564

  Exploration

9,665

14,395

28,324

31,258

  Depreciation, Depletion and Amortization

85,355

62,037

235,579

188,967

  Impairment of Oil & Gas Properties

35,789

-

35,789

-

  General and Administrative (excluding Stock-Based Compensation)

17,254

9,629

40,244

32,511

  Stock-Based Compensation (1)

3,823

5,292

9,431

16,592

  Taxes Other Than Income

8,489

10,719

31,135

34,531

197,122

132,870

497,640

423,642

Gain (Loss) on Sale of Assets (2)

265

572

5,411

(3,283)

Income from Operations

22,273

74,723

134,931

218,859

Interest Expense and Other  

16,758

14,857

47,439

44,129

Income Before Income Taxes

5,515

59,866

87,492

174,730

Income Tax Expense

1,617

20,969

33,215

62,751

Net Income

$       3,898

$     38,897

$     54,277

$     111,979

Net Earnings Per Share - Basic

$         0.04

$         0.38

$         0.52

$           1.08

Weighted Average Common Shares Outstanding

103,955

103,647

103,889

103,603

(1) Includes the impact of the Company's performance share awards and restricted stock amortization as well as expense related to stock options and stock appreciation rights.  Also includes expense for the Supplemental Employee Incentive Plans which commenced in 2008.

(2) The gain on sale of assets in 2010 primarily relates to the sale of the Woodford Shale Prospect offset by a charge related to properties sold in the third quarter.  The loss on sale in 2009 primarily relates to the sale of our Canadian properties in April 2009, partially offset by a gain on sale of assets from the first quarter 2009 sale of Thornwood properties in the North region.  The gain (loss) on sale of assets for the three and nine months ended September 30, 2009 includes a tax benefit associated with foreign tax credits.

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

(In thousands)

September 30,

December 31,

2010

2009

Assets

Current Assets

$              220,985

$           281,502

Property, Equipment and Other Assets

3,725,725

3,401,899

  Total Assets

$           3,946,710

$        3,683,401

Liabilities and Stockholders' Equity

Current Liabilities

$              304,539

$           308,741

Long-Term Debt

1,020,000

805,000

Deferred Income Taxes

676,106

644,801

Other Liabilities

102,727

112,345

Stockholders' Equity

1,843,338

1,812,514

  Total Liabilities and Stockholders' Equity

$           3,946,710

$        3,683,401

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(In thousands)

Quarter Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

Cash Flows From Operating Activities

Net Income

$                  3,898

$             38,897

$           54,277

$        111,979

Unrealized (Gain) Loss on Derivatives

193

1,233

(162)

418

Impairment of Oil and Gas Properties

35,789

-

35,789

-

Income Charges Not Requiring Cash

90,182

68,418

248,761

208,861

(Gain) Loss on Sale of Assets

(265)

(572)

(5,411)

3,283

Deferred Income Tax Expense

1,374

36,521

30,465

74,773

Changes in Assets and Liabilities

(8,797)

(29,062)

(6,592)

(357)

Stock-Based Compensation Tax Benefit

(108)

(13,085)

(108)

(13,085)

Exploration Expense

1,969

14,395

10,473

31,258

Net Cash Provided by Operations

124,235

116,745

367,492

417,130

Cash Flows From Investing Activities

Capital Expenditures

(203,901)

(116,344)

(658,123)

(426,177)

Proceeds from Sale of Assets

4,291

513

21,033

80,180

Net Cash Used in Investing

(199,610)

(115,831)

(637,090)

(345,997)

Cash Flows From Financing Activities

Net Increase (Decrease) in Debt

80,000

(5,000)

290,000

(57,000)

Capitalized Debt Issuance Costs

(11,710)

-

(13,696)

(10,409)

Stock-Based Compensation Tax Benefit

108

13,085

108

13,085

Dividends Paid

(3,119)

(3,110)

(9,348)

(9,323)

Other

(1)

(67)

(36)

83

Net Cash Provided by (Used in) Financing

65,278

4,908

267,028

(63,564)

Net (Decrease) / Increase in Cash and Cash Equivalents

$              (10,097)

$               5,822

$            (2,570)

$            7,569

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

(In thousands, except per share amounts)

Quarter Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

As Reported - Net Income

$           3,898

$        38,897

$   54,277

$ 111,979

Reversal of Selected Items, Net of Tax:

Impairment of Oil & Gas Properties

22,189

-

22,189

-

(Gain) Loss on Sale of Assets (1)

(164)

(359)

(3,355)

1,270

Stock-Based Compensation Expense

2,370

3,323

5,847

10,414

Pension Expense (2)

3,838

-

3,838

-

Unrealized Loss (Gain) on Derivatives (3)

120

774

(100)

263

Net Income Excluding Selected Items

$         32,251

$        42,635

$   82,696

$ 123,926

As Reported - Net Earnings Per Share

$             0.04

$            0.38

$       0.52

$       1.08

Per Share Impact of Reversing Selected Items

0.27

0.03

0.28

0.12

Net Earnings Per Share Including Reversal of Selected Items

$             0.31

$            0.41

$       0.80

$       1.20

Weighted Average Common Shares Outstanding

103,955

103,647

103,889

103,603

(1) The gain on sale of assets in 2010 primarily relates to the sale of the Woodford Shale Prospect offset by a charge related to properties sold in the third quarter. The loss on sale in 2009 primarily relates to the sale of our Canadian properties in April 2009, partially offset by a gain on sale of assets from the first quarter 2009 sale of Thornwood properties in the North region. The loss on sale of assets for the three and nine months ended September 30, 2009 considers a tax benefit associated with foreign tax credits.

(2) On July 28, 2010, the Company notified its employees of its plan to terminate its qualified and non-qualified pension plans, effective September 30, 2010. This amount represents curtailment losses related to the plan terminations and expenses related to the acceleration of amortization of prior service costs and actuarial losses over the expected amortization period until final distribution of assets from each plan. Pension expense is included in General and Administrative Expense in the Condensed Consolidated Statement of Operations.

(3) This unrealized loss (gain) on derivatives is included in Natural Gas Production Revenues in the Condensed Consolidated Statement of Operations and represents the mark to market change related to the Company's natural gas basis swaps.

Discretionary Cash Flow Calculation and Reconciliation

(In thousands)

Quarter Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

Discretionary Cash Flow

As Reported - Net Income

$           3,898

$        38,897

$   54,277

$ 111,979

Plus / (Less):

Unrealized Loss (Gain) on Derivatives

193

1,233

(162)

418

Impairment of Oil & Gas Properties

35,789

-

35,789

-

Income Charges Not Requiring Cash

90,182

68,418

248,761

208,861

(Gain) Loss on Sale of Assets

(265)

(572)

(5,411)

3,283

Deferred Income Tax Expense

1,374

36,521

30,465

74,773

Exploration Expense

1,969

14,395

10,473

31,258

Discretionary Cash Flow

133,140

158,892

374,192

430,572

Changes in Assets and Liabilities

(8,797)

(29,062)

(6,592)

(357)

Stock-Based Compensation Tax Benefit

(108)

(13,085)

(108)

(13,085)

Net Cash Provided by Operations

$       124,235

$      116,745

$ 367,492

$ 417,130

Net Debt Reconciliation

(In thousands)

September 30,

December 31,

2010

2009

Current Portion of Long-Term Debt

$         75,000

$               -

Long-Term Debt

$    1,020,000

$      805,000

           Total Debt

$    1,095,000

$      805,000

Stockholders' Equity

1,843,338

1,812,514

       Total Capitalization

$    2,938,338

$   2,617,514

Total Debt

$    1,095,000

$      805,000

Less:  Cash and Cash Equivalents

(37,588)

(40,158)

       Net Debt

$    1,057,412

$      764,842

Net Debt

$    1,057,412

$      764,842

Stockholders' Equity

1,843,338

1,812,514

       Total Adjusted Capitalization

$    2,900,750

$   2,577,356

Total Debt to Total Capitalization Ratio

37.3%

30.8%

Less:  Impact of Cash and Cash Equivalents

0.8%

1.1%

       Net Debt to Adjusted Capitalization Ratio

36.5%

29.7%

SOURCE Cabot Oil & Gas Corporation



RELATED LINKS

http://www.cabotog.com