Cabot Oil & Gas Corporation Announces Third Quarter Results

Year-To-Date Equivalent Production Grew 42 Percent Year-Over-Year

News provided by

Cabot Oil & Gas Corporation

Oct 25, 2012, 06:01 ET

HOUSTON, Oct. 25, 2012 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today reported financial results for the third quarter of 2012. Highlights for the third quarter of 2012 include:

  • Production of 66.5 billion cubic feet equivalent (Bcfe), an increase of 33 percent over last year's comparable quarter.
  • Net income of $36.6 million, or $0.17 per share.
  • Net income excluding selected items of $43.1 million, or $0.21 per share.
  • Cash flow from operations of $164.0 million and discretionary cash flow of $175.7 million.

"Our year-to-date production growth relative to last year further highlights the prolific nature of our wells in the Marcellus, even in the face of continued delays in permitting for gathering lines," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Based on our plans to connect (or begin producing) 45 additional wells in the fourth quarter, we expect a ramp in production above our previous highs."

Third Quarter 2012

Production during the third quarter of 2012 was 66.5 Bcfe, with 62.7 Bcf of natural gas production and 629 thousand barrels of liquids production. These figures represent a 31 percent increase in gas production and a 61 percent increase in liquids production compared to the third quarter of 2011.

The Company reported net income of $36.6 million, or $0.17 per share, for the third quarter of 2012, compared to $28.5 million, or $0.14 per share, for the third quarter of 2011. Excluding the effect of selected items (which are detailed in the table below), net income was $43.1 million, or $0.21 per share, for the third quarter of 2012, compared to $35.3 million, or $0.17 per share, for the third quarter of 2011. Higher equivalent production and higher realized crude oil prices drove the quarter's overall improvement, partially offset by lower realized natural gas prices and increased operating expenses associated with higher production.

Cash flow from operations for the third quarter of 2012 was $164.0 million, compared to the third quarter of 2011 when cash flow from operations was $154.7 million. Discretionary cash flow for the third quarter of 2012 was $175.7 million, compared to the third quarter of 2011 when discretionary cash flow was $165.4 million.

Including the effect of hedges, natural gas price realizations were $3.68 per thousand cubic feet (Mcf) for the third quarter of 2012, down 20 percent compared to the third quarter of 2011. Oil price realizations were $101.34 per barrel, up 17 percent compared to the third quarter of 2011.

On an absolute basis, depreciation, depletion and amortization increased due to higher equivalent production volumes, partially offset by a decrease in amortization of unproved properties. Transportation expense increased as a result of new gathering arrangements, primarily in northeast Pennsylvania, and greater volumes.  Exploration, general and administrative (excluding stock-based compensation) and interest and other expenses all declined compared to the third quarter of 2011. While total expenses trended higher between the comparable third quarters driven by higher production volumes, the aggregate per unit cost continues to decline. "Our industry leading cost structure continues to result in decreasing per unit costs over time. For example, direct operating expenses for the third quarter declined 22 percent per unit to $0.43 per Mcfe compared to 2011," added Dinges.

Year-to-Date 2012

Production during the nine-month period ended September 30, 2012, was 188.9 Bcfe, with 178.4 Bcf of natural gas production and 1.8 million barrels of liquids production. These figures represent increases of 42 percent, 40 percent, and 91 percent, respectively, compared to the nine-month period ended September 30, 2011.  "Our current year-to-date production already exceeds full-year 2011 levels," stated Dinges.  "Taking into account last year's fourth quarter sale of our Rocky Mountain properties, our pro forma year-to-date production growth is 51 percent."

For the nine-month period ended September 30, 2012, net income was $90.9 million, or $0.43 per share, compared to net income of $96.0 million, or $0.46 per share, for the nine-month period ended September 30, 2011.

Excluding the effect of selected items (which are detailed in the table below), net income was $81.8 million, or $0.39 per share, for the nine-month period ended September 30, 2012, compared to $99.0 million, or $0.47 per share, for the nine-month period ended September 30, 2011.  Lower natural gas price realizations and increased absolute operating expenses, partially offset by higher equivalent production and higher realized crude oil prices, resulted in lower earnings.

For the nine-month period ended September 30, 2012, cash flow from operations was $455.1 million, compared to cash flow from operations of $375.4 million for the nine-month period ended September 30, 2011. Discretionary cash flow was $456.3 million for the nine-month period ended September 30, 2012, compared to discretionary cash flow of $428.2 million for the nine-month period ended September 30, 2011.

Financial Position and Liquidity

At September 30, 2012, the Company's total debt was $1,062 million, of which $300 million were borrowings outstanding under the Company's credit facility. Total lender commitments under the Company's credit facility are $900 million, with $599 million of available credit under its facility at September 30, 2012.

As of September 30, 2012, the Company's net debt to adjusted capitalization ratio was 32.8%, compared to 30.4% as of December 31, 2011 (see attached table for the calculation).

Conference Call

Listen in live to Cabot Oil & Gas Corporation's third quarter financial and operating results discussion with financial analysts on Friday, October 26, 2012, at 9:30 a.m. EDT (8:30 a.m. CDT) at www.cabotog.com. 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.

FOR MORE INFORMATION CONTACT
Scott Schroeder (281) 589-4993

OPERATING DATA
























Quarter Ended

September 30,

Nine Months Ended

September 30,




2012

2011

2012

2011

PRODUCED NATURAL GAS (Bcf) & OIL (MBbl)








Natural Gas









Appalachia

56.1

39.4

158.1

101.1

Other

6.6

8.3

20.3

26.1

Total

62.7

47.7

178.4

127.2












Crude/Condensate/NGL

629

391

1,760

920












Equivalent Production (Bcfe)

66.5

50.0

188.9

132.7












PRICES(1)









Average Produced Gas Sales Price ($/Mcf)









Appalachia

$

3.80

$

4.48

$

3.70

$

4.54

Other

$

2.65

$

5.05

$

2.60

$

5.00

Total


$

3.68

$

4.58

$

3.57

$

4.64












Average Crude/Condensate Price ($/Bbl)

$

101.34

$

86.89

$

100.30

$

89.69












WELLS DRILLED











Gross

38

33

104

85

Net

30

27

81

67

Gross Success Rate

95%

97%

97%

99%












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

















Quarter Ended

September 30,

Nine Months Ended

September 30,




2012

2011

2012

2011

Realized Impacts to Gas Pricing

$ 0.91

$ 0.44

$ 1.03

$ 0.38

Realized Impacts to Oil Pricing

$ 6.65

$ 3.62

$ 3.39

$ 0.64

 

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)





























Quarter Ended

Nine Months Ended





September 30,

September 30,





2012

2011

2012

2011

Operating Revenues









  Natural Gas

$ 231,896

$ 218,521

$ 639,729

$ 588,976

  Crude Oil and Condensate

57,870

33,158

165,317

79,792

  Brokered Natural Gas

5,238

9,467

23,831

38,947

  Other

1,870

971

5,790

4,124





296,874

262,117

834,667

711,839

Operating Expenses









Direct Operations

28,269

27,292

84,895

76,878

Transportation and Gathering

34,430

19,768

97,827

48,710

Brokered Natural Gas

4,258

8,204

20,380

33,362

Taxes Other Than Income

10,436

7,042

39,873

21,070

Exploration

9,303

20,190

29,548

31,090

Depreciation, Depletion   and Amortization

110,448

90,293

335,421

250,642

General and Administrative (excluding

  Stock-Based Compensation) 

13,440

17,917

69,808

48,906

Stock-Based Compensation(1)

10,389

10,032

23,441

29,348





220,973

200,738

701,193

540,006

Gain (Loss) on Sale of Assets

(126)

3,854

67,042

36,408

Income from Operations

75,775

65,233

200,516

208,241

Interest Expense and Other 

16,219

18,517

51,631

53,928

Income Before Income Taxes

59,556

46,716

148,885

154,313

Income Tax Expense

22,948

18,234

58,021

58,268

Net Income

$   36,608

$   28,482

$   90,864

$   96,045

Earnings Per Share - Basic(2)

$       0.17

$       0.14

$       0.43

$       0.46

Weighted Average Common Shares Outstanding(2)

209,656

208,570

209,433

208,463

(1)

Includes the impact of the Company's performance share awards, restricted stock amortization, stock appreciation rights and expense associated with the Supplemental Employee Incentive Plan.

(2)

All Earnings Per Share and Weighted Average Common Share figures have been retroactively adjusted for the 2-for-1 split of the Company's common stock effective January 25, 2012.

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

  (In thousands)









































September 30,

December 31,











2012

2011

Assets













Current Assets

$           224,674

$           345,800

Properties and Equipment, Net

4,218,921

3,934,584

Other Assets

39,342

51,109

   Total Assets

$        4,482,937

$        4,331,493
















Liabilities and Stockholders' Equity







Current Liabilities

$           412,790

$           343,344

Long-Term Debt, excluding Current Maturities

987,000

950,000

Deferred Income Taxes

837,319

802,592

Other Liabilities

145,541

130,789

Stockholders' Equity

2,100,287

2,104,768

   Total Liabilities and Stockholders' Equity

$        4,482,937

$        4,331,493
















 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

  (In thousands)



Quarter Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Cash Flows From Operating Activities






Net Income

$      36,608

$     28,482

$       90,864

$       96,045

Deferred Income Tax Expense

15,641

20,495

42,714

57,381

Loss (Gain) on Sale of Assets

126

(3,854)

(67,042)

(36,408)

Exploration Expense

1,193

13,347

12,118

13,851

Unrealized (Gain) Loss on Derivatives

149

64

449

950

Income Charges Not Requiring Cash

121,942

106,856

377,239

296,391

Changes in Assets and Liabilities

(11,692)

(10,725)

(1,230)

(52,844)

Net Cash Provided by Operations

163,967

154,665

455,112

375,366








Cash Flows From Investing Activities






Capital Expenditures

(257,871)

(264,773)

(669,198)

(668,987)

Proceeds from Sale of Assets

25

27,773

132,740

82,109

Investment in Equity Method Investment

(2,400)

-

(4,488)

-

Net Cash Used in Investing

(260,246)

(237,000)

(540,946)

(586,878)








Cash Flows From Financing Activities






Net Increase (Decrease) in Debt

90,000

110,000

112,000

230,000

Capitalized Debt Issuance Costs

-

-

(5,005)

(1,025)

Dividends Paid

(4,193)

(3,129)

(12,561)

(9,379)

Other

(671)

(922)

(1,010)

(1,105)

Net Cash (Used in) Provided by Financing

85,136

105,949

93,424

218,491








Net Increase (Decrease) in Cash and Cash Equivalents

$     (11,143)

$      23,614

$         7,590

$         6,979












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,

2012

2011

2012

2011

As Reported - Net Income

$    36,608

$    28,482

$   90,864

$   96,045

Reversal of Selected Items, Net of Tax:







(Gain) Loss on Sale of Assets (1)

77

(2,389)

(41,030)

(22,573)

Stock-Based Compensation Expense

6,358

6,220

14,346

18,196

Pension Expense(2)

-

2,956

12,294

6,708

Unrealized Loss (Gain) on Derivatives(3)

91

40

275

589

Pennsylvania Impact Fee(4)

-

-

5,067

-

Net Income Excluding Selected Items

$      43,134

$     35,309

$   81,816

$   98,965

As Reported - Earnings Per Share(5)

$          0.17

$         0.14

$       0.43

$       0.46

Per Share Impact of Reversing Selected Items (5)

0.04

0.03

(0.04)

0.01

   Earnings Per Share Including Reversal







of Selected Items(5)

$         0.21

$       0.17

$       0.39

$       0.47

   Weighted Average Common Shares Outstanding(5)

209,656

208,570

209,433

208,463

(1)

The gain on sale in 2012 primarily relates to the sale of certain of our Pearsall shale undeveloped leaseholds in south Texas in the second quarter of 2012. The gain on sale of assets in 2011 primarily relates to the sale of certain oil and gas assets in East Texas.

(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. These amounts represent pension expenses related to the plan termination, including settlement costs and expenses related to the acceleration of amortization of prior service costs and actuarial losses over the period. Final settlement of the pension plan occurred as of the end of the second quarter 2012. Pension expense is included in General and Administrative expense in the Condensed Consolidated Statement of Operations.

(3)

This unrealized loss (gain) is included in Natural Gas revenues in the Condensed Consolidated Statement of Operations and represents the change in fair value related to derivatives not designated as hedging instruments.

(4)

In February 2012, the Pennsylvania state legislature authorized the assessment of an impact fee on Marcellus shale production. This amount represents the initial year accrual related to our 2011 and prior wells. Expense associated with the impact fee are included in Taxes Other Than Income in the Condensed Consolidated Statement of Operations.

(5)

All Earnings Per Share and Weighted Average Common Share figures have been retroactively adjusted for the 2-for-1 split of the Company's common stock effective January 25, 2012.


 

Discretionary Cash Flow Calculation and Reconciliation

(In thousands)









Quarter Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

   Discretionary Cash Flow






   As Reported - Net Income

$    36,608

$    28,482

$   90,864

$   96,045

   Plus / (Less): 






   Deferred Income Tax Expense

15,641

20,495

42,714

57,381

   Loss (Gain) on Sale of Assets

126

(3,854)

(67,042)

(36,408)

   Exploration Expense

1,193

13,347

12,118

13,851

   Unrealized Loss (Gain) on Derivatives

149

64

449

950

   Income Charges Not Requiring Cash

121,942

106,856

377,239

296,391

   Discretionary Cash Flow

175,659

165,390

456,342

428,210

   Changes in Assets and Liabilities

(11,692)

(10,725)

(1,230)

(52,844)

   Net Cash Provided by Operations

$    163,967

$    154,665

$  455,112

$   375,366
















































Net Debt Reconciliation

(In thousands)















September 30,

December 31,




2012

2011











   Current Portion of Long-Term Debt

$           75,000

$                   -



   Long-Term Debt

$         987,000

$       950,000



   Total Debt

$      1,062,000

$       950,000



   Stockholders' Equity

2,100,287

2,104,768



        Total Capitalization

$      3,162,287

$    3,054,768











   Total Debt

$     1,062,000

$       950,000



   Less:  Cash and Cash Equivalents

(37,501)

(29,911)



        Net Debt

$     1,024,499

$       920,089











   Net Debt

$     1,024,499

$       920,089



   Stockholders' Equity

2,100,287

2,104,768



        Total Adjusted Capitalization

$      3,124,786

$    3,024,857











  Total Debt to Total Capitalization Ratio

33.6%

31.1%



   Less:  Impact of Cash and Cash Equivalents

0.8%

0.7%



        Net Debt to Adjusted Capitalization Ratio

32.8%

30.4%



















SOURCE Cabot Oil & Gas Corporation

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