Cabot Oil & Gas Corporation Announces 2010 Results, Record Production of Over 130 Bcfe

News provided by

Cabot Oil & Gas Corporation

Feb 22, 2011, 06:05 ET

HOUSTON, Feb. 22, 2011 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced its 2010 financial results, including net income of $103.4 million, or $0.99 per share, cash flow from operations of $484.9 million and discretionary cash flow of $457.6 million.  These results compare to 2009 net income of $148.3 million, or $1.43 per share, cash flow from operations of $614.1 million and discretionary cash flow of $604.6 million.  The full year selected items, detailed in an attached table, net to a reduction of $1.0 million, or $0.01 per share, on reported net income.  

"Overall 2010 was a transitional year, as we streamlined our operations in the Marcellus and migrated our South region to 100 percent of its capital allocated towards liquids.  Additionally, for 2010, Cabot posted tremendous operational numbers, reported net income of over $100 million for the sixth consecutive year and solidified its balance sheet for the long-term," said Dan O. Dinges, Chairman, President and Chief Executive Officer.

For 2010 equivalent production surpassed the 130 Bcfe level for the first time, establishing a new benchmark for both absolute levels and for year-over-year growth, which totaled 26.8 percent.  The price comparison for natural gas realizations was $5.54 per Mcf in 2010 versus $7.47 per Mcf in 2009, while oil increased over 14 percent year-over-year to $97.91 per barrel in 2010.  Gains associated with the hedge portfolio once again added significantly to price realizations and improved overall revenues in 2010 by $173 million. In absolute terms, total operating expenses plus interest expense increased 15 percent; with the 26 plus percent improvement in production, the per unit expense comparisons dropped nine percent year-to-year. "We anticipate this trend towards lower unit cost levels to continue in 2011," commented Dinges.

As it relates to the tax provision, due to the increased activity in the Pennsylvania Marcellus, a true-up of deferred taxes was required to reflect a larger portion of activity taking place in higher state tax jurisdictions. "As we continue to expand our programs and presence in Pennsylvania, we will continue to monitor its impact on deferred taxes, making adjustments to deferred taxes when required as part of our annual fourth quarter evaluation," said Dinges. This rate change increased the effective tax rate for the year to 47.9 percent, requiring a 55.8 percent effective tax rate for the fourth quarter.  This change and the gain were the large selected items in the fourth quarter.  

Fourth Quarter

The reported 2010 fourth quarter figures included net income of $49.1 million, or $0.47 per share, $117.4 million for cash flow from operations and $83.4 million for discretionary cash flow.  These compare to net income of $36.4 million, or $0.34 per share, cash flow from operations of $196.9 million and discretionary cash flow of $174.1 million in the previous year. Removing the selected items, which are highlighted in the table, net income would be $20.0 million, or $0.19 per share, for the 2010 fourth quarter versus $53.8 million, or $0.51 per share in the comparable 2009 period.  Lower commodity prices and overall higher absolute (but lower per unit) expenses, partially offset by higher production, drove the results.

Balance Sheet

In 2010, the Company placed $175 million of new 10, 12 and 15 year senior notes, repaid $75 million of senior notes that were to mature in 2011 and extended its Credit Facility out five years.  "Financially, we continue to have a solid balance sheet, and we retain a significant level of flexibility as evident by our 32.9 percent net debt to adjusted total capital ratio," added Dinges.

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2010 year-end and fourth quarter financial and operating results discussion with financial analysts on Wednesday, February 23, 2011 at 9:30 a.m. EST (8:30 a.m. CST) 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 34679366.  The replay will be available through Friday, February 25, 2011.  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

Twelve Months Ended


December 31,

December 31,


2010

2009

2010

2009

PRODUCED NATURAL GAS (Bcf) & OIL (MBbl)







Natural Gas







 North

25.7

13.4

81.0

48.2

 South

10.6

11.6

44.5

48.8

 Canada

-

-

-

1.0

 Total

36.3

25.0

125.5

98.0









Crude/Condensate/Ngl







 North

24.0

25.5

100.0

118.4

 South

174.0

193.6

759.0

719.6

 Canada

-

-

-

6.7

 Total

198.0

220.1

859.0

844.7



























Equivalent Production (Bcfe)

37.5

26.3

130.6

103.0









PRICES







Average Produced Gas Sales Price ($/Mcf)







 North

$

4.14

$

6.67

$

4.59

$

6.59

 South

$

7.19

$

8.94

$

7.26

$

8.42

 Canada

$

-

$

-

$

-

$

3.72

 Total (1)

$

5.02

$

7.73

$

5.54

$

7.47









Average Crude/Condensate Price ($/Bbl)







 North

$

75.06

$

75.16

$

69.31

$

54.11

 South

$

102.91

$

96.64

$

101.65

$

90.86

 Canada

$

-

$

-

$

-

$

33.97

 Total (1)

$

99.53

$

94.23

$

97.91

$

85.52









WELLS DRILLED









 Gross

30

24

113

143

 Net

20

22

87

119

 Gross Success Rate

100%

83%

98%

95%









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











Quarter Ended

Twelve Months Ended


December 31,

December 31,


2010

2009

2010

2009

    Realized Impacts to Gas Pricing

$   1.25

$   3.47

$   1.23

$   3.80

    Realized Impacts to Oil Pricing

$ 18.66

$ 21.40

$ 22.31

$ 28.25

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)




















Quarter Ended

Twelve Months Ended


December 31,

December 31,


2010

2009

2010

2009

Operating Revenues







 Natural Gas

$ 181,641

$ 191,192

$ 694,577

$ 729,734

 Brokered Natural Gas

15,385

21,166

65,281

75,283

 Crude Oil and Condensate

18,664

19,910

79,091

69,936

 Other


1,185

1,224

5,086

4,323


216,875

233,492

844,035

879,276

Operating Expenses







 Brokered Natural Gas Cost


13,124

18,811

56,466

67,030

 Direct Operations - Field and Pipeline


25,846

22,421

99,642

93,985

 Exploration


14,401

19,526

42,725

50,784

 Depreciation, Depletion and Amortization


91,504

62,293

327,083

251,260

 Impairment of Oil & Gas Properties

5,114

17,622

40,903

17,622

 General and Administrative (excluding Stock-Based Compensation) 

24,018

10,725

64,767

43,236

 Stock-Based Compensation (1)


5,484

8,546

14,410

25,138

 Taxes Other Than Income


6,759

10,118

37,894

44,649


186,250

170,062

683,890

593,704

Gain (Loss) on Sale of Assets (2)


100,883

(20)

106,294

(3,303)

Income from Operations

131,508

63,410

266,439

282,269

Interest Expense and Other  

20,502

14,850

67,941

58,979

Income Before Income Taxes

111,006

48,560

198,498

223,290

Income Tax Expense (3)


61,897

12,196

95,112

74,947

Net Income


$   49,109

$   36,364

$ 103,386

$ 148,343

Net Earnings Per Share - Basic


$       0.47

$       0.34

$       0.99

$       1.43

Weighted-Average Common Shares Outstanding


103,979

103,654

103,911

103,616









(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 a gain from the sale of our Pennsylvania gathering infrastructure, a gain from the sale of our investment in equity securities of Tourmaline, a gain from the sale of certain oil and gas properties in the Texas Panhandle and a gain on the sale of our Woodford shale properties, partially offset by a charge on certain oil and gas properties in Colorado.  The loss on sale of assets in 2009 primarily relates to a loss on our April 2009 sale of our Canadian properties, partially offset by a gain on sale of assets from the first quarter 2009 sale of the Thornwood properties in the North.  

(3) Income tax expense for the quarter and year ended December 31, 2010 includes an unfavorable adjustment due to a charge to income tax expense to reflect an increase in our state rates used in establishing deferred income taxes mainly due to a shift in our state apportionment factors to higher rate states, primarily in Pennsylvania as a result of our increased focus on development of our Marcellus shale properties.

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

 (In thousands)





December 31,

December 31,

2010


2009

Assets


Current Assets

$      203,008

$      281,502

Property, Equipment and Other Assets

3,802,023

3,401,899

  Total Assets

$   4,005,031

$   3,683,401




Liabilities and Stockholders' Equity


Current Liabilities

$      303,835

$      308,741

Long-Term Debt

975,000

805,000

Deferred Income Taxes

714,953

644,801

Other Liabilities

138,543

112,345

Stockholders' Equity

1,872,700

1,812,514

  Total Liabilities and Stockholders' Equity

$   4,005,031

$   3,683,401

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

 (In thousands)

















Quarter Ended

Twelve Months Ended

December 31,

December 31,

2010


2009


2010


2009

Cash Flows From Operating Activities






Net Income

$        49,109

$        36,364

$ 103,386

$ 148,343

Unrealized (Gain) Loss on Derivatives

388

1,536

226

1,954

Impairment of Oil and Gas Properties

5,114

17,622

40,903

17,622

Income Charges Not Requiring Cash

97,116

71,958

345,877

280,819

(Gain) Loss on Sale of Assets

(100,883)

20

(106,294)

3,303

Deferred Income Tax Expense

31,344

27,042

61,809

101,815

Changes in Assets and Liabilities

34,047

23,559

27,455

23,202

Stock-Based Compensation Tax Benefit

-

(705)

(108)

(13,790)

Exploration Expense

1,184

19,526

11,657

50,784

Net Cash Provided by Operations

117,419

196,922

484,911

614,052








Cash Flows From Investing Activities






Capital Expenditures

(199,128)

(185,030)

(857,251)

(611,207)

Proceeds from Sale of Assets

222,477

-

243,510

80,180

Net Cash Provided by (Used in) Investing

23,349

(185,030)

(613,741)

(531,027)








Cash Flows From Financing Activities






Net Increase (Decrease) in Debt

(120,000)

(5,000)

170,000

(62,000)

Retirement of Treasury Stock

-

-

-

-

Capitalized Debt Issuance Costs

(125)

-

(13,821)

(10,409)

Stock-Based Compensation Tax Benefit

-

705

108

13,790

Dividends Paid

(3,119)

(3,109)

(12,467)

(12,432)

Other

837

-

801

83

Net Cash Provided by (Used in) Financing

(122,407)

(7,404)

144,621

(70,968)








Net Increase in Cash and Cash Equivalents

$        18,361

$          4,488

$   15,791

$   12,057

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

(In thousands, except per share amounts)











Quarter Ended

Twelve Months Ended


December 31,

December 31,


2010

2009

2010

2009

  As Reported - Net Income

$          49,109

$         36,364

$       103,386

$    148,343

  Reversal of Selected Items, Net of Tax (If Applicable):







Impairment of Oil & Gas Properties and Other Assets

3,171

11,102

25,360

11,102

(Gain) Loss on Sale of Assets (1)

(62,547)

13

(65,902)

1,283

Stock-Based Compensation Expense

3,400

5,384

8,934

15,798

Pension Expense (2)

4,245

-

8,083

-

PaDEP Settlement and Related Legal Fees (3)

3,409

-

3,409

-

Unrealized (Gain) Loss  on Derivatives (4)

241

968

140

1,231

Income Tax Expense (5)

18,973

-

18,973

-

  Net Income Excluding Selected Items

$          20,001

$         53,831

$       102,383

$    177,757

  As Reported - Net Earnings Per Share

$              0.47

$             0.34

$             0.99

$          1.43

  Per Share Impact of Reversing Selected Items

$             (0.28)

0.17

(0.01)

0.29

  Net Earnings Per Share Including Reversal







of Selected Items

$              0.19

$             0.51

$             0.98

$          1.72

  Weighted-Average Common Shares Outstanding

103,979

103,654

103,911

103,616









(1)  The gain on sale of assets in 2010 primarily relates to a gain from the sale of our Pennsylvania gathering infrastructure, a gain from the sale of our investment in equity securities of Tourmaline, a gain from the sale of certain oil and gas properties in the Texas Panhandle and a gain on the sale of our Woodford shale properties, partially offset by a charge on certain oil and gas properties in Colorado.  The loss on sale of assets in 2009 primarily relates to a loss on our April 2009 sale of our Canadian properties, partially offset by a gain on sale of assets from the first quarter 2009 sale of the Thornwood properties in the North.    


(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 Consolidated Statement of Operations.    

(3)  Represents costs associated with the December 2010 Settlement Agreement and Consent Order with the PaDEP and associated legal fees.    

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


(5)  Represents an unfavorable charge to income tax expense to reflect an increase in our state rates used in establishing deferred income taxes mainly due to a shift in our state apportionment factors to higher rate states, primarily in Pennsylvania as a result of our increased focus on development of our Marcellus shale properties.  

Discretionary Cash Flow Calculation and Reconciliation

(In thousands)











Quarter Ended

Twelve Months Ended


December 31,

December 31,


2010

2009

2010

2009

  Discretionary Cash Flow






  As Reported - Net Income

$          49,109

$         36,364

$       103,386

$    148,343

  Plus / (Less):








  Unrealized (Gain) Loss on Derivatives

388

1,536

226

1,954

  Impairment of Oil & Gas Properties

5,114

17,622

40,903

17,622

  Income Charges Not Requiring Cash

97,116

71,958

345,877

280,819

  (Gain) Loss on Sale of Assets

(100,883)

20

(106,294)

3,303

  Deferred Income Tax Expense

31,344

27,042

61,809

101,815

  Exploration Expense

1,184

19,526

11,657

50,784

  Discretionary Cash Flow

83,372

174,068

457,564

604,640

  Changes in Assets and Liabilities

34,047

23,559

27,455

23,202

  Stock-Based Compensation Tax Benefit

-

(705)

(108)

(13,790)

  Net Cash Provided by Operations

$        117,419

$       196,922

$       484,911

$    614,052

Net Debt Reconciliation

(In thousands)







December 31,

December 31,


2010

2009





  Long-Term Debt

975,000

805,000

  Stockholders' Equity

1,872,700

1,812,514

       Total Capitalization

$     2,847,700

$    2,617,514





  Total Debt

$        975,000

$       805,000

  Less:  Cash and Cash Equivalents

(55,949)

(40,158)

       Net Debt

$        919,051

$       764,842





  Net Debt

$        919,051

$       764,842

  Stockholders' Equity

1,872,700

1,812,514

       Total Adjusted Capitalization

$     2,791,751

$    2,577,356





 Total Debt to Total Capitalization Ratio

34.2%

30.8%

  Less:  Impact of Cash and Cash Equivalents

1.3%

1.1%

       Net Debt to Adjusted Capitalization Ratio

32.9%

29.7%

FOR MORE INFORMATION CONTACT

Scott Schroeder (281) 589-4993

SOURCE Cabot Oil & Gas Corporation

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