Cabot Oil & Gas Corporation Announces Second Quarter 2015 Financial and Operating Results

Jul 24, 2015, 07:30 ET from Cabot Oil & Gas Corporation

HOUSTON, July 24, 2015 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today reported its financial and operating results for the second quarter of 2015. "Despite our strategic decision to curtail Marcellus volumes in the second quarter due to the adverse price environment, Cabot still generated production growth and reduced unit costs year-over-year," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Our top-tier Marcellus asset affords us the ability to reduce our gross production volumes by approximately 500 million cubic feet (Mmcf) per day and still report positive normalized results."

Second Quarter 2015 Financial Results

Equivalent production in the second quarter of 2015 was 138.0 billion cubic feet equivalent (Bcfe), consisting of 128.4 billion cubic feet (Bcf) of natural gas and 1.6 million barrels (Mmbbls) of liquids (crude oil/condensate/natural gas liquids). These figures represent increases of 8 percent, 5 percent, and 68 percent, respectively, compared to the second quarter of 2014.

Cash flow from operations in the second quarter of 2015 was $171.2 million, compared to $329.6 million in the second quarter of 2014. Discretionary cash flow in the second quarter of 2015 was $183.2 million, compared to $332.3 million in the second quarter of 2014. Net loss in the second quarter of 2015 was $27.5 million, or $0.07 per share, compared to net income of $118.4 million, or $0.28 per share, in the second quarter of 2014. Excluding the effect of selected items including a $36.5 million after-tax non-cash mark-to-market loss on natural gas derivatives, net income was $14.6 million, or $0.03 per share, in the second quarter of 2015, compared to $115.3 million, or $0.28 per share, in the second quarter of 2014. EBITDAX in the second quarter of 2015 was $203.9 million, compared to $367.1 million in the second quarter of 2014. Significant reductions in realized prices for both natural gas and oil were the primary drivers for the lower results in the quarter, partially offset by higher equivalent production. See the supplemental tables at the end of this press release for a reconciliation of non-GAAP measures including discretionary cash flow, net income excluding selected items, EBITDAX and net debt to adjusted capitalization ratio.

Natural gas price realizations, including the effect of hedges, were $2.15 per thousand cubic feet (Mcf) in the second quarter of 2015, down 38 percent compared to the second quarter of 2014. Excluding the impact of hedges, natural gas price realizations for the quarter were $1.75 per Mcf, representing an $0.89 discount to NYMEX settlement prices. Oil price realizations were $56.10 per barrel (Bbl), down 43 percent compared to the second quarter of 2014.

Total per unit costs (including financing) decreased to $2.52 per thousand cubic feet equivalent (Mcfe) in the second quarter of 2015, an improvement of 3 percent from $2.59 per Mcfe in the second quarter of 2014. "Our cash unit costs in the Marcellus during the second quarter were approximately $0.85 per Mcf, while our Eagle Ford cash unit costs were approximately $15.00 per Bbl," expressed Dinges. "With the expectation of prolonged weakness in commodity prices, we continue to focus on reducing costs and maximizing operating efficiencies throughout the organization."

Cabot drilled or participated in a total of 37 net wells during the second quarter of 2015 and incurred a total of $228.2 million in capital expenditures associated with activity during the second quarter. "For a majority of the second quarter the Company's total rig count stood at four, with the expectation of holding this level flat through the remainder of the year and into the first part of 2016," commented Dinges. "We do not believe that accelerating activity and allocating incremental capital in this commodity price environment is the appropriate investment decision, especially in light of a more favorable outlook for Cabot's realized natural gas prices upon in-service of Constitution Pipeline in the second half of 2016."

Year-To-Date 2015 Financial Results

Production during the six-month period ended June 30, 2015 was 309.4 Bcfe, consisting of 290.2 Bcf of natural gas and 3.2 Mmbbls of liquids. These figures represent increases of 25 percent, 22 percent, and 95 percent, respectively, compared to the six-month period ended June 30, 2014.

For the six-month period ended June 30, 2015, cash flow from operations was $438.6 million, compared to $584.9 million for the six-month period ended June 30, 2014. Discretionary cash flow was $423.4 million for the six-month period ended June 30, 2015, compared to $651.8 million for the six-month period ended June 30, 2014. For the six-month period ended June 30, 2015, net income was $12.7 million, or $0.03 per share, compared to $225.5 million, or $0.54 per share, for the six-month period ended June 30, 2014. Excluding the effect of selected items including a $38.8 million after-tax non-cash mark-to-market loss on natural gas derivatives, net income was $64.0 million, or $0.15 per share, compared to $225.0 million, or $0.54 per share, for the six-month period ended June 30, 2014. EBITDAX for the six-month period ended June 30, 2015 was $483.3 million, compared to $719.8 million for the six-month period ended June 30, 2014.

Natural gas price realizations, including the effect of hedges, were $2.32 per Mcf for the six-month period ended June 30, 2015, down 36 percent compared to the six-month period ended June 30, 2014. Oil price realizations were $50.00 per Bbl, down 49 percent compared to the six-month period ended June 30, 2014.

Total per unit costs (including financing) decreased to $2.41 per Mcfe for the six-month period ended June 30, 2015, an improvement of 8 percent from $2.63 per Mcfe for the six-month period ended June 30, 2014.

Cabot drilled or participated in a total of 78 net wells during the six-month period ended June 30, 2015 and incurred a total of $540.4 million in capital expenditures associated with activity during this period. "Over 80 percent of the net wells drilled during the first half of the year were on pad locations required to meet our obligation for continuous development or acreage capture," stated Dinges. "We continue to prudently manage our capital program with a near-term focus on holding our acreage positions in our two core plays and improving our operating efficiencies."

Operational Highlights

Marcellus Shale

During the second quarter of 2015, the Company averaged 1,341 Mmcf per day of net Marcellus production (1,575 gross operated Mmcf per day), an increase of 7 percent over the prior year's comparable quarter. As previously announced, the Company curtailed a significant amount of its production volumes in the second quarter due to weakness in regional natural gas prices throughout Appalachia. Cabot does not anticipate an improvement in price realizations during the third quarter and as a result has initiated third quarter Marcellus gross production guidance at 1,550 to 1,600 Mmcf per day, in line with its guidance for the second quarter.

Cabot is currently operating three rigs 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 second quarter of 2015 was 17,889 barrels of oil equivalent (Boe) per day, an increase of 74 percent over the prior year's comparable quarter.  

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

Financial Position and Liquidity

As of June 30, 2015, the Company's net debt to adjusted capitalization ratio was 48.0 percent, compared to 44.7 percent at December 31, 2014 (detailed in the table below). The Company's total debt was $1,995 million, of which $383 million was outstanding under the Company's $1.8 billion revolving credit facility.

Third Quarter and Full-Year 2015 Guidance

The Company has provided third quarter net production guidance of 1,375 to 1,425 Mmcf per day for natural gas and 15,750 to 17,000 Bbls per day for liquids. The Company expects its natural gas price realizations before the impact of hedges to average between $0.95 and $1.05 below NYMEX settlement prices for the third quarter.

Cabot's full-year equivalent production growth guidance range of 10 to 18 percent remains unchanged. Cabot's 2015 capital program also remains unchanged at $900 million. "We front-end loaded this year's investment program, which will significantly reduce our run-rate capital spending for the second half of the year," highlighted Dinges. For further disclosure on Cabot's natural gas pricing exposure by index and updated unit cost guidance, please see the current Guidance slide in the Investor Relations section of the Company's website.

Conference Call

A conference call is scheduled for Friday, July 24, 2015, at 9:30 a.m. Eastern Time to discuss second quarter 2015 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

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

PRODUCED NATURAL GAS (Bcf) & LIQUIDS (Mbbl)

Natural Gas

Appalachia

125.9

118.4

285.0

231.2

Other

2.5

3.4

5.2

6.4

Total

128.4

121.8

290.2

237.6

Crude/Condensate/NGL

1,612

961

3,206

1,647

Equivalent Production (Bcfe)

138.0

127.6

309.4

247.5

PRICES(1)

Average Produced Gas Sales Price ($/Mcf)

Appalachia

$

2.14

$

3.44

$

2.31

$

3.57

Other

$

2.49

$

4.65

$

2.75

$

4.80

Total

$

2.15

$

3.47

$

2.32

$

3.60

Average Crude/Condensate Price ($/Bbl)

$

56.10

$

98.84

$

50.00

$

98.39

WELLS DRILLED

Gross

44

49

87

76

Net

37

35

78

62

Gross success rate

100%

100%

100%

100%

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

Quarter Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

Realized Impacts to Gas Pricing

$

0.40

$

(0.30)

$

0.31

$

(0.45)

Realized Impacts to Oil Pricing

$

$

(1.25)

$

$

(0.89)

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

Quarter Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

OPERATING REVENUES

Natural gas

$

224,806

$

437,761

$

584,997

$

870,571

Crude oil and condensate

81,233

86,341

143,791

145,485

Gain (loss) on derivative instruments

(6,819)

(2,329)

27,304

(2,329)

Brokered natural gas

3,813

8,140

8,640

21,293

Other

3,264

3,274

6,330

7,970

306,297

533,187

771,062

1,042,990

OPERATING EXPENSES

Direct operations

36,112

35,605

72,129

71,439

Transportation and gathering

98,295

83,976

219,531

161,741

Brokered natural gas

2,885

7,031

6,624

18,891

Taxes other than income

11,611

12,816

22,891

25,860

Exploration

5,298

4,676

14,030

11,150

Depreciation, depletion and amortization

152,513

157,563

328,009

304,981

General and administrative (excluding stock-based compensation)

11,354

13,853

27,973

32,318

Stock-based compensation(1)

8,624

6,274

14,534

9,445

326,692

321,794

705,721

635,825

Earnings (loss) on equity method investments

1,512

756

2,933

756

Gain (loss) on sale of assets

(79)

(1,496)

59

(2,781)

INCOME (LOSS) FROM OPERATIONS

(18,962)

210,653

68,333

405,140

Interest expense

24,168

16,334

47,734

32,891

Income (loss) before income taxes

(43,130)

194,319

20,599

372,249

Income tax (benefit) expense

(15,622)

75,899

7,852

146,798

NET INCOME (LOSS)

$

(27,508)

$

118,420

$

12,747

$

225,451

Earnings (loss) per share - Basic

$

(0.07)

$

0.28

$

0.03

$

0.54

Weighted-average common shares outstanding

413,713

417,291

413,530

417,097

__________________________________

(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)

June 30,

2015

December 31,

2014

Assets

Current assets

$

254,993

$

413,447

Properties and equipment, net (Successful efforts method)

5,132,655

4,925,711

Other assets

117,272

98,558

Total assets

$

5,504,920

$

5,437,716

Liabilities and Stockholders' Equity

Current liabilities

$

278,852

$

499,018

Long-term debt

1,995,000

1,752,000

Deferred income taxes

878,069

843,876

Other liabilities

207,083

200,089

Stockholders' equity

2,145,916

2,142,733

Total liabilities and stockholders' equity

$

5,504,920

$

5,437,716

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(In thousands)

Quarter Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

Cash Flows From Operating Activities

Net income (loss)

$

(27,508)

$

118,420

$

12,747

$

225,451

Deferred income tax expense

(7,921)

60,850

7,160

118,453

(Gain) loss on sale of assets

79

1,496

(59)

2,781

Exploratory dry hole cost

16

114

178

2,154

(Gain) loss on derivative instruments

6,819

2,329

(27,304)

2,329

Net cash received (paid) in settlement of derivative instruments

51,045

(15,262)

88,730

(15,262)

Income charges not requiring cash

160,694

164,349

341,948

315,922

Changes in assets and liabilities

(12,014)

(2,726)

15,191

(66,880)

Net cash provided by operations

171,210

329,570

438,591

584,948

Cash Flows From Investing Activities

Capital expenditures

(250,001)

(278,912)

(645,092)

(617,613)

Acquisitions

(16,149)

(16,300)

Proceeds from sale of assets

(79)

(863)

3,002

(755)

Restricted cash

19,712

28,094

Investment in equity method investments

(5,036)

(16,293)

(10,114)

(22,230)

Net cash used in investing

(271,265)

(276,356)

(668,504)

(612,504)

Cash Flows From Financing Activities

Net increase (decrease) in debt

118,000

(29,000)

243,000

46,000

Dividends paid

(8,274)

(8,347)

(16,537)

(16,679)

Stock-based compensation tax benefit

2,049

4,311

5,486

20,354

Capitalized debt issuance costs

(7,838)

(7,838)

Other

(2,599)

1

79

91

Net cash provided by (used in) financing

101,338

(33,035)

224,190

49,766

Net (decrease) increase in cash and cash equivalents

$

1,283

$

20,179

$

(5,723)

$

22,210

 

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

(In thousands, except per share amounts)

Quarter Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

As reported - net income (loss)

$

(27,508)

$

118,420

$

12,747

$

225,451

Reversal of selected items, net of tax:

(Gain) loss on sale of assets

50

901

(37)

1,674

(Gain) loss on derivative instruments (1)

36,543

(7,786)

38,816

(7,786)

Drilling rig termination fees

44

3,256

Stock-based compensation expense

5,446

3,777

9,184

5,686

Net income (loss) excluding selected items

$

14,575

$

115,312

$

63,966

$

225,025

As reported - earnings (loss) per share

$

(0.07)

$

0.28

$

0.03

$

0.54

Per share impact of reversing selected items

0.10

0.12

Earnings per share including reversal of selected items

$

0.03

$

0.28

$

0.15

$

0.54

Weighted average common shares outstanding

413,713

417,291

413,530

417,097

____________________________________

(1) Effective April 1, 2014, the Company elected to discontinue hedge accounting for its commodity derivatives on a prospective basis. 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

(In thousands)

Quarter Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

Discretionary Cash Flow

As reported - net income (loss)

$

(27,508)

$

118,420

$

12,747

$

225,451

Plus (less):

Deferred income tax expense

(7,921)

60,850

7,160

118,453

(Gain) loss on sale of assets

79

1,496

(59)

2,781

Exploratory dry hole cost

16

114

178

2,154

(Gain) loss on derivative instruments

6,819

2,329

(27,304)

2,329

Net cash received (paid) in settlement of derivative instruments

51,045

(15,262)

88,730

(15,262)

Income charges not requiring cash

160,694

164,349

341,948

315,922

Discretionary Cash Flow

183,224

332,296

423,400

651,828

Changes in assets and liabilities

(12,014)

(2,726)

15,191

(66,880)

Net cash provided by operations

$

171,210

$

329,570

$

438,591

$

584,948

EBITDAX Calculation and Reconciliation

(in thousands)

Quarter Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

As reported - net income (loss)

$

(27,508)

$

118,420

$

12,747

$

225,451

Plus (less):

Interest expense

24,168

16,334

47,734

32,891

Income tax (benefit) expense

(15,622)

75,899

7,852

146,798

Depreciation, depletion and amortization

152,513

157,563

328,009

304,981

Exploration

5,298

4,676

14,030

11,150

(Gain) loss on sale of assets

79

1,496

(59)

2,781

Non-cash (gain) loss on derivative instruments

57,864

(12,933)

61,426

(12,933)

Stock-based compensation and other

7,112

5,660

11,602

8,689

EBITDAX

$

203,904

$

367,115

$

483,341

$

719,808

 

Net Debt Reconciliation

(In thousands)

June 30,

2015

December 31,

2014

Long-term debt

$

1,995,000

$

1,752,000

Stockholders' equity

2,145,916

2,142,733

Total Capitalization

$

4,140,916

$

3,894,733

Total debt

$

1,995,000

$

1,752,000

Less: Cash and cash equivalents

(15,231)

(20,954)

Net Debt

$

1,979,769

$

1,731,046

Net debt

$

1,979,769

$

1,731,046

Stockholders' equity

2,145,916

2,142,733

Total Adjusted Capitalization

$

4,125,685

$

3,873,779

Total debt to total capitalization ratio

48.2%

45.0%

Less: Impact of cash and cash equivalents

0.2%

0.3%

Net Debt to Adjusted Capitalization Ratio

48.0%

44.7%

 

SOURCE Cabot Oil & Gas Corporation



RELATED LINKS

http://www.cabotog.com