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Cabot Oil & Gas Corporation Announces Second Quarter Results
Jul 24, 2012
Equivalent Production Grew 40 Percent Year-Over-Year

HOUSTON, July 24, 2012 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today reported financial results for the second quarter of 2012. Highlights for the second quarter of 2012 include:

  • Production of 62.8 Bcfe, an increase of 40 percent over last year's comparable quarter and a 5 percent increase over the first quarter of 2012.
  • Net income of $35.9 million, or $0.17 per share.
  • Net income excluding selected items of $10.2 million, or $0.05 per share.
  • Cash flow from operations of $159.4 million and discretionary cash flow of $142.1 million.

Second Quarter 2012

Production during the second quarter of 2012 was 62.8 Bcfe, with 59.2 Bcf of natural gas production and 593 thousand barrels of liquids production. These figures represent increases of 40 percent, 37 percent, and 96 percent, respectively, compared to the second quarter of 2011.

"Even with delays occurring in gathering our natural gas, the quarter results once again demonstrated the potential of our prolific acreage, with significant production growth reported over last year," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Not only did liquids and natural gas production increase year-over-year, both also grew from quarter to quarter. Because of these results and our outlook, we are confidently reaffirming our production guidance."

The Company reported net income of $35.9 million, or $0.17 per share, for the second quarter of 2012, compared to the second quarter of 2011 when the Company reported net income of $54.7 million, or $0.26 per share. Excluding the effect of selected items (which are detailed in the table below), net income was $10.2 million, or $0.05 per share, for the second quarter of 2012, compared to $42.9 million, or $0.20 per share, for the second quarter of 2011. The decline in net income was driven by lower natural gas price realizations and higher operating expenses, partially offset by higher production.

Cash flow from operations for the second quarter of 2012 was $159.4 million, compared to the second quarter of 2011 when cash flow from operations was $129.5 million. Discretionary cash flow for the second quarter of 2012 was $142.1 million, compared to the second quarter of 2011 when discretionary cash flow was $150.5 million.

Including the effect of hedges, natural gas price realizations were $3.39 per Mcf for the second quarter of 2012, down 27 percent compared to the second quarter of 2011. Oil price realizations were $102.61 per barrel, up 8 percent compared to the second quarter of 2011.

Total expenses trended higher between the comparable second quarters driven by higher production volumes. Depreciation, depletion and amortization increased due to higher equivalent production volumes, however, the per unit rate continues to move lower. General & administrative expenses increased primarily due to the final accounting for the terminated pension plan of $13.8 million pre-tax and legal costs and other professional fees. Transportation expense increases relate to new gathering arrangements, primarily in northeast Pennsylvania, and greater volumes. Additionally, exploration expense increased as the Company expensed its Brown Dense well. "Since our investment plans for the foreseeable future are in existing areas of operations, the Marcellus, Eagle Ford/Pearsall, and Marmaton, the limited production coming from our first Brown Dense exploration well does not support its cost and therefore the well was written off," stated Dinges. "We will monitor peer activity before making any additional capital expenditures in the play."

Year-to-Date 2012

Production during the six-month period ended June 30, 2012 was 122.4 Bcfe, with 115.7 Bcf of natural gas production and 1.1 million barrels of liquids production. These figures represent increases of 48 percent, 45 percent, and 114 percent, respectively, compared to the six-month period ended June 30, 2011.

For the six-month period ended June 30, 2012, net income was $54.3 million, or $0.26 per share, compared to net income of $67.6 million, or $0.32 per share, for the six-month period ended June 30, 2011.

Excluding the effect of selected items (which are detailed in the table below), net income was $38.7 million, or $0.19 per share, for the six-month period ended June 30, 2012, compared to $63.7 million, or $0.30 per share, for the six-month period ended June 30, 2011.

"For the first half of the year total costs, including financing, increased in absolute terms, but fell $0.32 per unit between the first halves of 2012 and 2011," commented Dinges. "The compression of earnings was driven by a 19 percent decrease in per unit revenues as a result of the continued downward pressure on natural gas prices."

For the six-month period ended June 30, 2012, cash flow from operations was $291.1 million, compared to cash flow from operations of $220.7 million for the six-month period ended June 30, 2011. Discretionary cash flow was $280.7 million for the six-month period ended June 30, 2012, compared to discretionary cash flow of $262.8 million for the six-month period ended June 30, 2011.

Financial Position and Liquidity

At June 30, 2012, the Company's total debt was $972 million, of which $210 million were borrowings outstanding under the Company's credit facility. The Company's total commitments under its credit facility are $900 million, resulting in $689 million of available credit under its facility at June 30, 2012. The borrowing base under the credit facility was reaffirmed during the quarter at $1.7 billion.

As of June 30, 2012, the Company's net debt to adjusted capitalization ratio was 30.2%, 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 second quarter financial and operating results discussion with financial analysts on Wednesday, July 25, 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 http://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


Six Months Ended





June 30,



June 30,





2012


2011



2012


2011

PRODUCED NATURAL GAS (Bcf) & OIL (MBbl)










Natural Gas











  Appalachia


52.4


34.6



102.0


61.7

  Other


6.8


8.5



13.7


17.8

  Total


59.2


43.1



115.7


79.5













Crude/Condensate/NGL


593


303



1,131


529













Equivalent Production (Bcfe)


62.8


45.0



122.4


82.7













PRICES(1)











Average Produced Gas Sales Price ($/Mcf)










 Appalachia

$

3.52

$

4.56


$

3.64

$

4.58

 Other

$

2.34

$

5.12


$

2.58

$

4.98

Total 


$

3.39

$

4.67


$

3.52

$

4.67













Average Crude/Condensate Price ($/Bbl)

$

102.61

$

95.17


$

99.76

$

91.80













WELLS DRILLED 











  Gross


35


28



66


52

  Net


28


22



51


40

  Gross Success Rate


97%


100%



99%


100%













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

 







Quarter Ended


Six Months Ended





June 30,



June 30,





2012


2011



2012


2011

Realized Impacts to Gas Pricing

$          1.18


$          0.32



$          1.10


$          0.34

Realized Impacts to Oil Pricing

$          5.55


$         (1.74)



$          1.66


$         (1.61)
























CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)



(In thousands, except per share amounts)































Quarter Ended


Six Months Ended






June 30,


June 30,






2012


2011


2012


2011


Operating Revenues









  Natural Gas


$        201,051


$        200,357


$        407,833


$        370,455


  Brokered Natural Gas

5,149


11,072


18,593


29,480


  Crude Oil and Condensate

57,466


28,042


107,447


46,634


  Other


1,991


1,225


3,920


3,153






265,657


240,696


537,793


449,722


Operating Expenses









  Brokered Natural Gas Cost

4,250


9,796


16,122


25,158


  Direct Operations

29,306


22,579


56,626


49,586


  Transportation and Gathering

33,139


16,074


63,397


28,942


  Taxes Other Than Income

10,854


5,877


29,437


14,028


  Exploration

16,244


4,592


20,245


10,900


  Depreciation, Depletion and Amortization

114,616


83,225


224,973


160,349











 General and Administrative  
   (excluding Stock-Based Compensation) 

35,475


14,828


56,369


30,989


  Stock-Based Compensation(1)

11,397


11,178


13,052


19,316






255,281


168,149


480,221


339,268


Gain (Loss) on Sale of Assets

67,703


34,071


67,168


32,554


 Income from Operations

78,079


106,618


124,740


143,008


Interest Expense and Other 

18,495


18,044


35,412


35,411


Income Before Income Taxes

59,584


88,574


89,328


107,597


Income Tax Expense

23,647


33,897


35,073


40,034


 Net Income

$          35,937


$          54,677


$          54,255


$          67,563


Earnings Per Share - Basic(2)

$              0.17


$              0.26


$              0.26


$              0.32


Weighted Average Common Shares Outstanding(2)

209,512


208,528


209,320


208,408













(1)

Includes the impact of the Company's performance share awards and restricted stock amortization as well as expense related to stock appreciation rights. Also includes expense for 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)































June 30,


December 31,















2012


2011





Assets

















Current Assets

$          295,867


$           345,800





Properties and Equipment, Net

4,061,674


3,934,584





Other Assets

52,651


51,109





   Total Assets

$       4,410,192


$        4,331,493






















Liabilities and Stockholders' Equity










Current Liabilities

$          340,859


$           343,344





Long-Term Debt, excluding Current Maturities

972,000


950,000





Deferred Income Taxes

829,027


802,592





Other Liabilities

136,976


130,789





Stockholders' Equity

2,131,330


2,104,768





   Total Liabilities and Stockholders' Equity

$       4,410,192


$        4,331,493







































CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)




  (In thousands)
















































Quarter Ended


Six Months Ended











June 30,


June 30,











2012


2011


2012


2011

Cash Flows From Operating Activities









Net Income

$            35,937


$             54,677


$            54,255


$           67,563

Deferred Income Tax Expense

17,349


30,343


27,073


36,886

Loss (Gain) on Sale of Assets

(67,703)


(34,071)


(67,168)


(32,554)

Exploration Expense

10,876


11


10,925


504

Unrealized (Gain) Loss on Derivatives

342


903


300


886

Income Charges Not Requiring Cash

145,343


98,679


255,294


189,534

Changes in Assets and Liabilities

17,218


(21,054)


10,463


(42,118)

Net Cash Provided by Operations

159,362


129,488


291,142


220,701


















Cash Flows From Investing Activities









Capital Expenditures

(222,780)


(201,045)


(411,327)


(404,214)

Proceeds from Sale of Assets

131,435


49,293


132,715


54,336

Investment in Equity Method Investment

(2,088)


-


(2,088)


-

Net Cash Used in Investing

(93,433)


(151,752)


(280,700)


(349,878)


















Cash Flows From Financing Activities









Net Increase (Decrease) in Debt

(40,000)


40,000


22,000


120,000

Capitalized Debt Issuance Costs

(5,005)


-


(5,005)


(1,025)

Dividends Paid

(4,191)


(3,128)


(8,368)


(6,250)

Other

(420)


(190)


(339)


(183)

Net Cash (Used in) Provided by Financing

(49,616)


36,682


8,288


112,542


















Net Increase (Decrease) in Cash and Cash Equivalents

$            16,313


$             14,418


$            18,730


$         (16,635)














































































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,











2012


2011


2012


2011

As Reported - Net Income

$           35,937


$           54,677


$           54,255


$           67,563

Reversal of Selected Items, Net of Tax:









(Gain) Loss on Sale of Assets

(41,434)


(21,124)


(41,107)


(20,183)


Stock-Based Compensation Expense

6,975


6,930


7,988


11,976


Pension Expense (1)

8,470


1,879


12,294


3,751


Unrealized Loss (Gain) on Derivatives(2)

210


560


184


549


Pennsylvania Impact Fee(3)

-


-


5,067


-

Net Income Excluding Selected Items

$           10,158


$           42,922


$           38,681


$           63,656

As Reported - Earnings Per Share(4)

$               0.17


$               0.26


$               0.26


$               0.32

Per Share Impact of Reversing Selected Items (4)

(0.12)


(0.06)


(0.07)


(0.02)

Earnings Per Share Including Reversal









of Selected Items(4)

$               0.05


$               0.20


$               0.19


$               0.30

Weighted Average Common Shares Outstanding(4)

209,512


208,528


209,320


208,408




(1)

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. The three and six months ended June 30, 2012 and 2011 amounts represent pension expenses related to the plan termination, 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. As a result, all of the costs associated with the pension termination are now complete. Pension expense is included in General and Administrative expense in the Condensed Consolidated Statement of Operations. 





(2)

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.

 





(3)

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.





(4)

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


Six Months Ended











June 30,


June 30,











2012


2011


2012


2011

   Discretionary Cash Flow








   As Reported - Net Income

$           35,937


$           54,677


$           54,255


$           67,563

   Plus / (Less): 








   Deferred Income Tax Expense

17,349


30,343


27,073


36,886

   Loss (Gain) on Sale of Assets

(67,703)


(34,071)


(67,168)


(32,554)

   Exploration Expense

10,876


11


10,925


504

   Unrealized Loss (Gain) on Derivatives

342


903


300


886

   Income Charges Not Requiring Cash

145,343


98,679


255,294


189,534

   Discretionary Cash Flow

142,144


150,542


280,679


262,819

   Changes in Assets and Liabilities

17,218


(21,054)


10,463


(42,118)

   Net Cash Provided by Operations

$         159,362


$         129,488


$         291,142


$         220,701



































Net Debt Reconciliation





(In thousands)
































June 30,


December 31,















2012


2011






















   Total Debt

$         972,000


$         950,000





   Stockholders' Equity

2,131,330


2,104,768





        Total Capitalization

$    3,103,330


$    3,054,768






















   Total Debt

$         972,000


$         950,000





   Less:  Cash and Cash Equivalents

(48,641)


(29,911)





        Net Debt

$       923,359


$       920,089






















   Net Debt

$         923,359


$         920,089





   Stockholders' Equity

2,131,330


2,104,768





        Total Adjusted Capitalization

$    3,054,689


$    3,024,857






















  Total Debt to Total Capitalization Ratio

31.3%


31.1%





   Less:  Impact of Cash and Cash Equivalents

1.1%


0.7%





        Net Debt to Adjusted Capitalization Ratio

30.2%


30.4%





 

SOURCE Cabot Oil & Gas Corporation