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Cabot Oil & Gas Corporation Announces First Quarter 2016 Financial and Operating Results
Apr 29, 2016

HOUSTON, April 29, 2016 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) ("Cabot" or the "Company") today reported financial and operating results for the first quarter of 2016.

"Cabot's results for the quarter highlight our commitment to financial discipline, which was evident by our ability to fully fund our investing activities with operating cash flow and proceeds from a non-core divestiture," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Our positive results for the quarter were due in large part to continued enhancements to our industry-leading cost structure and improvements in our natural gas price differentials, which exceeded our expectations for the quarter. Based on our current outlook for the remainder of the year, we are well-positioned to deliver production growth while spending within our operating cash flow, which differentiates Cabot in this challenged market environment."

First Quarter 2016 Financial Results

Equivalent production in the first quarter of 2016 was 160.3 billion cubic feet equivalent (Bcfe), consisting of 153.1 billion cubic feet (Bcf) of natural gas, 1.1 million barrels (Mmbbls) of crude oil and condensate, and 92,000 barrels (Bbls) of natural gas liquids (NGLs).

Cash flow from operations in the first quarter of 2016 was $62.1 million, compared to $267.4 million in the first quarter of 2015. Discretionary cash flow in the first quarter of 2016 was $71.2 million, compared to $240.2 million in the first quarter of 2015. Net loss in the first quarter of 2016 was $51.2 million, or $0.12 per share, compared to net income of $40.3 million, or $0.10 per share, in the first quarter of 2015. Excluding the effect of selected items (detailed in the table below), net loss in the first quarter of 2016 was $55.4 million, or $0.13 per share, compared to net income of $49.2 million, or $0.12 per share, in the first quarter of 2015. EBITDAX in the first quarter of 2016 was $100.9 million, compared to $279.4 million in the first quarter of 2015. 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 were $1.49 per thousand cubic feet (Mcf) in the first quarter of 2016, down 39 percent compared to the first quarter of 2015. Natural gas price realizations for the quarter implied a $0.60 discount to NYMEX settlement prices compared to a $0.75 discount to NYMEX settlement prices in the first quarter of 2015 (excluding the impact of hedges). Oil price realizations were $27.65 per Bbl, down 37 percent compared to the first quarter of 2015. NGL price realizations were $7.22 per Bbl, down 35 percent compared to the first quarter of 2015.

Operating expenses (including financing) decreased to $2.26 per thousand cubic feet equivalent (Mcfe) in the first quarter of 2016, a 3 percent improvement compared to $2.33 per Mcfe in the first quarter of 2015. Cash operating expenses (excluding depreciation, depletion and amortization; stock-based compensation; exploratory dry hole cost; and amortization of debt issuance costs) decreased to $1.18 per Mcfe in the first quarter of 2016, a 6 percent improvement compared to $1.26 per Mcfe in the first quarter of 2015.

Cabot drilled 10 net wells and completed 21 net wells during the first quarter of 2016, incurring a total of $91.7 million in capital expenditures associated with activity during this period.

Operational Highlights

Marcellus Shale

During the first quarter of 2016, the Company averaged 1,628 million cubic feet (Mmcf) per day of net Marcellus production (1,913 gross operated Mmcf per day), an increase of 10 percent sequentially compared to the fourth quarter of 2015. During the first quarter, the Company drilled 7 net wells, completed 12 net wells and placed 8 net wells on production.

Cabot is currently operating 1 rig 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 first quarter of 2016 was 12,975 barrels of oil equivalent (Boe) per day, a decrease of 13 percent sequentially compared to the fourth quarter of 2015. Net oil production during the quarter was 11,908 Bbls per day, a decrease of 6 percent sequentially compared to the fourth quarter of 2015. In addition to natural production declines resulting from reduced operating activity, the primary driver of the lower sequential equivalent production was unscheduled downtime at a third-party processing plant which impacted natural gas and NGL volumes for a significant portion of the quarter. During the first quarter, the Company drilled 3 net wells and completed and placed on production 9 net wells, the majority of which were placed on production late in the quarter.

Cabot is not currently operating a rig in the Eagle Ford Shale and plans to drill 3 additional wells in 2016, all of which are scheduled for the second half of the year.

Non-Core Asset Sale

During the first quarter of 2016, the Company completed the divestiture of certain non-core oil and gas properties in East Texas to an undisclosed buyer for approximately $57 million. At December 31, 2015, proved reserves associated with these properties were 16.7 Bcfe (80% natural gas / 15% NGLs / 5% oil).

Financial Position and Liquidity

During the first quarter of 2016, Cabot closed on an offering of 50.6 million shares of its common stock (including the over-allotment option) for net proceeds of $995.6 million. The Company used a portion of the net proceeds to repay borrowings outstanding under its revolving credit facility.

As of March 31, 2016, Cabot had total debt of $1.6 billion and cash on hand of $579.3 million. The Company's net debt to adjusted capitalization ratio and net debt to trailing twelve months EBITDAX ratio were 25.8 percent and 1.6x, respectively, compared to 50.1 percent and 2.5x as of December 31, 2015.

Effective April 19, 2016, Cabot's borrowing base was unanimously approved by its 20 lenders at $3.2 billion. With $1.6 billion of senior notes outstanding, this leaves the Company with approximately $1.6 billion of available commitments under the $1.8 billion credit facility. The Company currently has no debt outstanding under the credit facility, resulting in approximately $2.2 billion of liquidity. Cabot's next annual borrowing base redetermination is scheduled for April 2017.

2016 Derivative Position Update

The Company has approximately 52 Bcf of natural gas swaps for the period of April to October 2016 at a weighted average price of approximately $2.51 per Mcf and 1.4 Mmbbls of crude oil collars for the period of April to December 2016 at a weighted average floor and ceiling price of $38.00 per Bbl and $47.28 per Bbl, respectively.

Second Quarter and Full Year 2016 Guidance

Cabot has provided second quarter net production guidance of 1,575 to 1,600 Mmcf per day for natural gas; 11,500 to 12,250 Bbls per day for crude oil and condensate; and 1,400 to 1,600 Bbls per day for NGLs. The Company expects its natural gas price realizations (before the impact of hedges) to average between $0.50 and $0.55 below NYMEX settlement prices for the second quarter based on current market indications.

Cabot has reaffirmed its $325 million capital budget and its production growth guidance range of 2 to 7 percent for 2016. The Company has also adjusted its 2016 guidance range for contributions to its equity method investments in the Constitution and Atlantic Sunrise pipelines to $30 million to $35 million, down from $80 million to $150 million, to reflect the current expectation for a second half of 2017 in-service date for Atlantic Sunrise and a second half of 2018 in-service date for Constitution. For further disclosure on Cabot's natural gas pricing exposure by index and updated unit cost guidance for the second quarter, 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, April 29, 2016, at 9:30 a.m. Eastern Time to discuss first quarter 2016 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 website 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




Three Months Ended
 March 31,



2016


2015

PRODUCTION VOLUMES





Natural gas (Bcf)


153.1



161.8


Crude/condensate (Mbbl)


1,110.0



1,428.0


Natural gas liquids (NGLs) (Mbbl)


92.0



166.0


Equivalent production (Bcfe)


160.3



171.4







AVERAGE SALES PRICE





Natural gas, including hedges ($/Mcf)


$

1.49



$

2.46


Natural gas, excluding hedges ($/Mcf)


$

1.49



$

2.23


Crude/condensate, including hedges ($/Bbl)


$

27.65



$

43.82


Crude/condensate, excluding hedges ($/Bbl)


$

27.65



$

43.82


NGL ($/Bbl)


$

7.22



$

11.06







AVERAGE UNIT COSTS ($/Mcfe)





Direct operations


$

0.16



$

0.21


Transportation and gathering


0.68



0.71


Taxes other than income


0.04



0.07


Exploration


0.04



0.05


Depreciation, depletion and amortization


1.01



1.02


General and administrative (excluding stock-based compensation)


0.11



0.10


Stock-based compensation


0.07



0.03


Interest expense


0.15



0.14




$

2.26



$

2.33












WELLS DRILLED





Gross


10



43


Net


10



42


Gross success rate


100

%


100

%






WELLS COMPLETED





Gross


21



39


Net


21



39


 


CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)



Three Months Ended
 March 31,


2016


2015

OPERATING REVENUES




   Natural gas

$

227,578



$

360,191


   Crude oil and condensate

30,676



62,558


   Gain (loss) on derivative instruments

18,994



34,123


   Brokered natural gas

3,180



4,827


   Other

1,513



3,066



281,941



464,765


OPERATING EXPENSES




   Direct operations

26,035



36,017


   Transportation and gathering

109,652



121,235


   Brokered natural gas

2,566



3,739


   Taxes other than income

5,994



11,280


   Exploration

6,383



8,732


   Depreciation, depletion and amortization

161,887



175,497


   General and administrative (excluding stock-based compensation)

17,770



16,619


   Stock-based compensation(1)

10,606



5,910



340,893



379,029


Earnings (loss) on equity method investments

2,009



1,421


Gain (loss) on sale of assets

1,354



138


INCOME (LOSS) FROM OPERATIONS

(55,589)



87,295


Interest expense

24,375



23,566


Income (loss) before income taxes

(79,964)



63,729


Income tax expense (benefit)

(28,770)



23,474


NET INCOME (LOSS)

$

(51,194)



$

40,255


Earnings (loss) per share - Basic

$

(0.12)



$

0.10


Weighted-average common shares outstanding

431,841



413,344







(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)



March 31,
 2016


December 31,
 2015

ASSETS




Current assets

$

720,687



$

144,786


Properties and equipment, net (Successful efforts method)

4,837,814



4,976,879


Other assets

144,207



131,373



$

5,702,708



$

5,253,038






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities

$

199,382



$

235,552


Long-term debt, net (excluding current maturities)

1,583,192



1,996,139


Deferred income taxes

780,295



807,236


Other liabilities

195,779



204,923


Stockholders' equity

2,944,060



2,009,188



$

5,702,708



$

5,253,038


 


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(In thousands)



Three Months Ended
 March 31,


2016


2015

CASH FLOWS FROM OPERATING ACTIVITIES




Net income (loss)

$

(51,194)



$

40,255


Deferred income tax expense (benefit)

(28,973)



15,081


(Gain) loss on sale of assets

(1,354)



(138)


Exploratory dry hole cost



162


(Gain) loss on derivative instruments

(18,994)



(34,123)


Net cash received (paid) in settlement of derivative instruments



37,685


Income charges not requiring cash

171,675



181,254


Changes in assets and liabilities

(9,070)



27,205


Net cash provided by operating activities

62,090



267,381






CASH FLOWS FROM INVESTING ACTIVITIES




Capital expenditures

(92,237)



(395,242)


Proceeds from sale of assets

49,828



3,081


Investment in equity method investments

(11,652)



(5,078)


Net cash used in investing activities

(54,061)



(397,239)






CASH FLOWS FROM FINANCING ACTIVITIES




Net increase (decrease) in debt

(413,000)



125,000


Sale of common stock, net

995,278




Dividends paid

(8,282)



(8,263)


Stock-based compensation tax benefit



3,437


Capitalized debt issuance costs

(3,223)




Other



2,678


Net cash provided by financing activities

570,773



122,852






Net increase (decrease) in cash and cash equivalents

$

578,802



$

(7,006)


 


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

(In thousands, except per share amounts)



Three Months Ended
 March 31,


2016


2015

As reported - net income (loss)

$

(51,194)



$

40,255


Reversal of selected items, net of tax:




    (Gain) loss on sale of assets

(862)



(87)


    (Gain) loss on derivative instruments (1)

(12,087)



2,246


     Drilling rig termination fees

2,028



3,059


     Stock-based compensation expense

6,749



3,726


Net income (loss) excluding selected items

$

(55,366)



$

49,199


As reported - earnings (loss) per share

$

(0.12)



$

0.10


Per share impact of reversing selected items

(0.01)



0.02


Earnings per share including reversal of selected items

$

(0.13)



$

0.12


Weighted average common shares outstanding

431,841



413,344







(1)

 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)



Three Months Ended
 March 31,


2016


2015

As reported - net income (loss)

$

(51,194)



$

40,255


Plus (less):




Deferred income tax expense (benefit)

(28,973)



15,081


(Gain) loss on sale of assets

(1,354)



(138)


Exploratory dry hole cost



162


(Gain) loss on derivative instruments

(18,994)



(34,123)


Net cash received (paid) in settlement of derivative instruments



37,685


Income charges not requiring cash

171,675



181,254


Discretionary Cash Flow

71,160



240,176


Changes in assets and liabilities

(9,070)



27,205


Net cash provided by operations

$

62,090



$

267,381


 


EBITDAX Calculation and Reconciliation

(in thousands)



Three Months Ended
 March 31,


2016


2015

As reported - net income (loss)

$

(51,194)



$

40,255


Plus (less):




Interest expense

24,375



23,566


Income tax expense (benefit)

(28,770)



23,474


Depreciation, depletion and amortization

161,887



175,497


Exploration

6,383



8,732


(Gain) loss on sale of assets

(1,354)



(138)


Non-cash (gain) loss on derivative instruments

(18,994)



3,562


(Earnings) loss on equity method investments

(2,009)



(1,421)


Stock-based compensation

10,606



5,910


EBITDAX

$

100,930



$

279,437


 

Net Debt Reconciliation

(In thousands)



March 31,
 2016


December 31,
 2015

Current portion of long-term debt

$

20,000



$

20,000


Long-term debt, net

1,583,192



1,996,139


Total debt

$

1,603,192



$

2,016,139


Stockholders' equity

2,944,060



2,009,188


Total Capitalization

$

4,547,252



$

4,025,327






Total debt

$

1,603,192



$

2,016,139


Less: Cash and cash equivalents

(579,316)



(514)


Net Debt

$

1,023,876



$

2,015,625






Net debt

$

1,023,876



$

2,015,625


Stockholders' equity

2,944,060



2,009,188


Total Adjusted Capitalization

$

3,967,936



$

4,024,813






Total debt to total capitalization ratio

35.3

%


50.1

%

Less: Impact of cash and cash equivalents

9.5

%


%

Net Debt to Adjusted Capitalization Ratio

25.8

%


50.1

%

 

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SOURCE Cabot Oil & Gas Corporation