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Cabot reports second quarter production up 52 percent from 2012

By Bob Downing Published: July 25, 2013

From Cabot Oil & Gas on Wednesday:

 

Cabot Oil & Gas Corporation Announces Second Quarter 2013 Results, Equivalent Production Increases 52 Percent Year-Over-Year

HOUSTON, July 24, 2013 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today reported its financial results for the second quarter of 2013. Highlights for the quarter include:

  • Production of 95.2 billion cubic feet equivalent (Bcfe), an increase of 52 percent over last year's comparable quarter.
  • Cash flow from operations of $277.3 million and discretionary cash flow of $297.1 million.
  • Net income of $89.1 million, or $0.42 per share.
  • Net income excluding selected items of $95.0 million, or $0.45 per share.
  • Total unit costs were $3.10 per thousand cubic feet equivalent (Mcfe), a 28 percent decline over last year's comparable quarter.

"During the second quarter, Cabot continued to deliver strong financial performance as evidenced by increases in net income and discretionary cash flow of 148 percent and 109 percent, respectively, over last year's comparable quarter," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Our success for the quarter was primarily attributable to the Company's Marcellus Shale drilling program, where operating efficiencies continue to reduce our already low cost structure. Our ability to fund the Company's peer-leading production growth within cash flow, as we did in the second quarter, differentiates Cabot."

Second Quarter 2013

Production in the second quarter of 2013 was 95.2 Bcfe, consisting of 90.7 billion cubic feet (Bcf) of natural gas and 763,000 barrels of liquids. These figures represent a 52 percent increase in equivalent production compared to the second quarter of 2012 and an increase of 7 percent sequentially over the first quarter of 2013. "Marcellus production during the second quarter outperformed our expectations, due in large part to strong well performance and the coordinated effort between our team and our infrastructure partner to manage line pressure across the field," stated Dinges.

Cash flow from operations in the second quarter of 2013 was $277.3 million, compared to $159.4 million in the second quarter of 2012. Discretionary cash flow in the second quarter of 2013 was $297.1 million, compared to $142.1 million in the second quarter of 2012. Higher equivalent production and realized natural gas prices drove the quarter's overall improvement, partially offset by lower realized oil prices and increased operating expenses associated with higher production.

Net income in the second quarter of 2013 was $89.1 million, or $0.42 per share, compared to $35.9 million, or $0.17 per share, in the second quarter of 2012. Excluding the effect of selected items (detailed in the table below), net income was $95.0 million, or $0.45 per share, in the second quarter of 2013, compared to $10.2 million, or $0.05 per share, in the second quarter of 2012.

Natural gas price realizations, including the effect of hedges, were $4.06 per thousand cubic feet (Mcf) in the second quarter of 2013, up 20 percent compared to the second quarter of 2012. "Although certain basis locations in the Marcellus play experienced some pricing weakness during the second quarter, the net effect on Cabot's realized price was negligible," commented Dinges. "Looking ahead, we believe gas price differentials will remain soft for the short term throughout the entire Marcellus area. However, new takeaway projects slated for this fall should bring differentials closer to their historical averages. We anticipate that this weakness will have a minimal effect on our realized prices in the third quarter." Oil price realizations, including the effect of hedges, were $101.39 per barrel (Bbl), down 1 percent compared to the second quarter of 2012.

Total unit costs (including financing) decreased to $3.10 per Mcfe in the second quarter of 2013, down 28 percent from $4.29 per Mcfe in the second quarter of 2012. All operating expense categories decreased on a per unit basis relative to last year's comparable quarter except for transportation and gathering expense, which increased 4 percent from $0.53 per Mcfe in the second quarter of 2012 to $0.55 per Mcfe in the second quarter of 2013, primarily as a result of increased natural gas production volumes in the Marcellus Shale.

Year-to-Date 2013

Production during the six-month period ended June 30, 2013, was 184.5 Bcfe, consisting of 175.8 Bcf of natural gas and 1.5 million barrels of liquids. These figures represent increases of 51 percent, 52 percent, and 29 percent, respectively, compared to the six-month period ended June 30, 2012.

For the six-month period ended June 30, 2013, cash flow from operations was $490.0 million, compared to $291.1 million for the six-month period ended June 30, 2012. Discretionary cash flow was $531.5 million for the six-month period ended June 30, 2013, compared to $280.7 million for the six-month period ended June 30, 2012. Higher equivalent production and, to a lesser extent, higher realized natural gas and oil prices drove the period's overall improvement, partially offset by increased operating expenses associated with higher production.

For the six-month period ended June 30, 2013, net income was $131.9 million, or $0.63 per share, compared to $54.3 million, or $0.26 per share, for the six-month period ended June 30, 2012. Excluding the effect of selected items (detailed in the table below), net income was $149.1 million, or $0.71 per share, compared to $38.7 million, or $0.19 per share, for the six-month period ended June 30, 2012.

Financial Position and Liquidity

At June 30, 2013, the Company's total debt was $1.1 billion, of which $380 million is outstanding under the Company's credit facility. Total lender commitments under the Company's credit facility remained at $900 million, resulting in $519 million of available credit under its facility at June 30, 2013.

As of June 30, 2013, the Company's net debt to adjusted capitalization ratio was 32.4 percent, compared to 33.2 percent at December 31, 2012 (detailed in the table below).

Conference Call

Listen in live to Cabot Oil & Gas Corporation's second quarter financial and operating results discussion with financial analysts on Thursday, July 25, 2013, at 9:30 a.m. EDT (8:30 a.m. CDT) at www.cabotog.com. To aid in the discussion on the conference call, the Company has posted a presentation entitled "Marcellus Marketing Supplementary Materials", which provides an overview of the Company's marketing strategy in the Marcellus Shale as well as commentary on infrastructure and pricing. This can be found in the Presentations section of the website under the Investor Info tab. Additionally, the latest financial guidance, including the Company's hedge positions, along with a replay of the webcast, which will be archived for one year, are available in the Investor Info 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 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

   

Six Months Ended

       

June 30,

   

June 30,

       

2013

 

2012

   

2013

 

2012

PRODUCED NATURAL GAS (Bcf) & LIQUIDS (MBbl)

                 

Natural Gas

                   

Appalachia

 

85.4

 

52.4

   

165.2

 

102.0

Other

 

5.3

 

6.8

   

10.6

 

13.7

Total

 

90.7

 

59.2

   

175.8

 

115.7

                       

Crude/Condensate/NGL

 

763

 

593

   

1,454

 

1,131

                       

Equivalent Production (Bcfe)

 

95.2

 

62.8

   

184.5

 

122.4

                       

PRICES(1)

                   

Average Produced Gas Sales Price ($/Mcf)

                   

Appalachia

$

4.09

$

3.52

 

$

3.81

$

3.64

Other

$

3.63

$

2.34

 

$

3.05

$

2.58

Total

 

$

4.06

$

3.39

 

$

3.77

$

3.52

                       

Average Crude/Condensate Price ($/Bbl)

$

101.39

$

102.61

 

$

102.65

$

99.76

                       

WELLS DRILLED

                   

Gross

 

51

 

35

   

83

 

66

Net

 

43.8

 

28

   

69.7

 

51

Gross success rate

 

96%

 

97%

   

96%

 

99%

                       

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

             
       

Quarter Ended

   

Six Months Ended

       

June 30,

   

June 30,

       

2013

 

2012

   

2013

 

2012

Realized Impacts to Gas Pricing

   

$ -

 

$ 1.18

   

$ 0.07

 

$ 1.10

Realized Impacts to Oil Pricing

   

$ 3.02

 

$ 5.55

   

$ 3.12

 

$ 1.66

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

                     
                     
       

Quarter Ended

 

Six Months Ended

       

June 30,

 

June 30,

       

2013

 

2012

 

2013

 

2012

Operating Revenues

                 

Natural gas

 

$ 368,391

 

$ 201,051

 

$ 662,184

 

$ 407,833

Crude oil and condensate

 

70,226

 

57,466

 

135,881

 

107,447

Brokered natural gas

 

8,244

 

5,149

 

19,137

 

18,593

Other

 

2,819

 

1,991

 

5,763

 

3,920

       

449,680

 

265,657

 

822,965

 

537,793

Operating Expenses

                 

Direct operations

 

36,978

 

29,306

 

68,475

 

56,626

Transportation and gathering

 

52,648

 

33,139

 

98,869

 

63,397

Brokered natural gas

 

6,704

 

4,250

 

15,093

 

16,122

Taxes other than income

 

11,364

 

10,854

 

23,051

 

29,437

Exploration

 

4,529

 

16,244

 

8,553

 

20,245

Depreciation, depletion and amortization

 

151,389

 

114,616

 

300,042

 

224,973

General and administrative (excluding stock-based compensation)

 

11,565

 

35,475

 

28,600

 

56,369

Stock-based compensation(1)

 

10,043

 

11,397

 

28,712

 

13,052

       

285,220

 

255,281

 

571,395

 

480,221

Gain (loss) on sale of assets

 

276

 

67,703

 

180

 

67,168

Income from Operations

 

164,736

 

78,079

 

251,750

 

124,740

Interest expense and other

 

16,701

 

18,495

 

32,956

 

35,412

Income before income taxes

 

148,035

 

59,584

 

218,794

 

89,328

Income tax expense

 

58,921

 

23,647

 

86,856

 

35,073

Net Income

 

$ 89,114

 

$ 35,937

 

$ 131,938

 

$ 54,255

Earnings per share - Basic

 

$ 0.42

 

$ 0.17

 

$ 0.63

 

$ 0.26

Weighted average common shares outstanding

 

210,349

 

209,512

 

210,250

 

209,320

                 

(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. The increase in expense for the first six months of 2013 compared to the first six months of 2012 is due to the Company's higher stock price and the resulting mark-to-market for liability awards.

 
 

 

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

(In thousands)

                           
                   

June 30,

 

December 31,

 
                   

2013

 

2012

 

Assets

                         

Current assets

$ 403,193

 

$ 270,310

 

Properties and equipment, net

4,558,207

 

4,310,977

 

Other assets

56,536

 

35,026

 

Total assets

$ 5,017,936

 

$ 4,616,313

 
                           

Liabilities and Stockholders' Equity

             

Current liabilities

$ 494,391

 

$ 444,139

 

Long-term debt, excluding current maturities

1,067,000

 

1,012,000

 

Deferred income taxes

1,015,493

 

882,672

 

Other liabilities

154,811

 

146,055

 

Stockholders' equity

2,286,241

 

2,131,447

 

Total liabilities and stockholders' equity

$ 5,017,936

 

$ 4,616,313

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(In thousands)

                                 
                                 
                   

Quarter Ended

 

Six Months Ended

                   

June 30,

 

June 30,

                   

2013

 

2012

 

2013

 

2012

Cash Flows From Operating Activities

                   

Net income

$ 89,114

 

$ 35,937

 

$ 131,938

 

$ 54,255

Deferred income tax expense

46,088

 

17,349

 

69,662

 

27,073

(Gain) / loss on sale of assets

(276)

 

(67,703)

 

(180)

 

(67,168)

Exploration expense

140

 

10,876

 

806

 

10,925

Unrealized (gain) / loss on derivatives

-

 

342

 

-

 

300

Income charges not requiring cash

162,034

 

145,343

 

329,239

 

255,294

Changes in assets and liabilities

(19,818)

 

17,218

 

(41,498)

 

10,463

Net cash provided by operations

277,282

 

159,362

 

489,967

 

291,142

                                 

Cash Flows From Investing Activities

                   

Capital expenditures

(263,887)

 

(222,780)

 

(524,056)

 

(411,327)

Proceeds from sale of assets

420

 

131,435

 

906

 

132,715

Investment in equity method investment

(3,000)

 

(2,088)

 

(4,250)

 

(2,088)

Net cash used in investing

(266,467)

 

(93,433)

 

(527,400)

 

(280,700)

                                 

Cash Flows From Financing Activities

                   

Net increase (decrease) in debt

15,000

 

(40,000)

 

55,000

 

22,000

Stock-based compensation tax benefit

5,210

 

-

 

7,348

 

-

Dividends paid

(4,206)

 

(4,191)

 

(8,407)

 

(8,368)

Capitalized debt issuance cost

-

 

(5,005)

 

-

 

(5,005)

Other

1

 

(420)

 

33

 

(339)

Net cash provided by (used in) financing

16,005

 

(49,616)

 

53,974

 

8,288

                                 

Net increase (decrease) in cash and cash equivalents

$ 26,820

 

$ 16,313

 

$ 16,541

 

$ 18,730

 

 

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,

                   

2013

 

2012

 

2013

 

2012

As reported - net income

$ 89,114

 

$ 35,937

 

$ 131,938

 

$ 54,255

Reversal of selected items, net of tax:

                       
 

(Gain) / loss on sale of assets

(166)

 

(41,434)

 

(109)

 

(41,107)

 

Stock-based compensation expense

6,046

 

6,975

 

17,314

 

7,988

 

Pension expense (1)

-

 

8,470

 

-

 

12,294

 

Unrealized (gain) / loss on derivatives

 

-

 

210

 

-

 

184

 

Pennsylvania impact fee (2)

-

 

-

 

-

 

5,067

Net income excluding selected items

$ 94,994

 

$ 10,158

 

$ 149,143

 

$ 38,681

As reported - earnings per share

 

$ 0.42

 

$ 0.17

 

$ 0.63

 

$ 0.26

Per share impact of reversing selected items

 

0.03

 

(0.12)

 

0.08

 

(0.07)

Earnings per share including reversal

                       
 

of selected items

$ 0.45

 

$ 0.05

 

$ 0.71

 

$ 0.19

Weighted average common shares outstanding

210,349

 

209,512

 

210,250

 

209,320

               

(1)

On July 28, 2010, the Company notified its employees of its plan to terminate its qualified pension plan, 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 distribution of the qualified 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.

(2)

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. Expenses associated with the impact fee are included in Taxes other than income in the Condensed Consolidated Statement of Operations.

 

 

 

Discretionary Cash Flow Calculation and Reconciliation

(In thousands)

                   

Quarter Ended

 

Six Months Ended

                   

June 30,

 

June 30,

                   

2013

 

2012

 

2013

 

2012

Discretionary Cash Flow

                           

As reported - net income

$ 89,114

 

$ 35,937

 

$ 131,938

 

$ 54,255

Plus / (less):

                           

Deferred income tax expense

46,088

 

17,349

 

69,662

 

27,073

(Gain) / loss on sale of assets

(276)

 

(67,703)

 

(180)

 

(67,168)

Exploration expense

140

 

10,876

 

806

 

10,925

Unrealized (gain) / loss on derivatives

-

 

342

 

-

 

300

Income charges not requiring cash

162,034

 

145,343

 

329,239

 

255,294

Discretionary Cash Flow

297,100

 

142,144

 

531,465

 

280,679

Changes in assets and liabilities

(19,818)

 

17,218

 

(41,498)

 

10,463

Net cash provided by operations

$ 277,282

 

$ 159,362

 

$ 489,967

 

$ 291,142

 

Net Debt Reconciliation

(In thousands)

                         
                   

June 30,

 

December 31,

                   

2013

 

2012

                         

Current portion of long-term debt

$ 75,000

 

$ 75,000

Long-term debt

$ 1,067,000

 

$ 1,012,000

Total debt

$ 1,142,000

 

$ 1,087,000

Stockholders' equity

2,286,241

 

2,131,447

Total Capitalization

$ 3,428,241

 

$ 3,218,447

                         

Total debt

$ 1,142,000

 

$ 1,087,000

Less: Cash and cash equivalents

(47,277)

 

(30,736)

Net Debt

$ 1,094,723

 

$ 1,056,264

                         

Net debt

$ 1,094,723

 

$ 1,056,264

Stockholders' equity

2,286,241

 

2,131,447

Total Adjusted Capitalization

$ 3,380,964

 

$ 3,187,711

                         

Total debt to total capitalization ratio

33.3%

 

33.8%

Less: Impact of cash and cash equivalents

0.9%

 

0.6%

Net Debt to Adjusted Capitalization Ratio

32.4%

 

33.2%

 

SOURCE Cabot Oil & Gas Corporation

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