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Cabot Oil & Gas Corporation Reports Record Results for 2004
Feb 21, 2005
  Net Income, Cash Flow From Operations and Discretionary Cash Flow Set New
                                    Highs

HOUSTON, Feb. 21 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced 2004 net income of $88.4 million, or $2.72 per share, nearly double its previous high set in 2001 and four times last year's $21.1 million, or $0.66 per share. The 2004 cash flow from operations of $273.0 million and discretionary cash flow of $294.3 million exceeded the records of $241.6 million for cash flow from operations and $266.4 million for discretionary cash flow established in 2003.

"A continuation of the high commodity price market drove the Company's record results," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "This strong level of cash flow afforded us the opportunity to pursue our largest organic capital program ever, which included 171 wells in the East region and 20 exploration wells overall." Dinges added, "The results also provided Cabot with its best year-end debt to total capitalization ratio at 37.2 percent and a significantly improved working capital position."

For the full year period, natural gas price realizations rose 15 percent to $5.20 per mcf, while oil price realizations moved higher by 7 percent to $31.55 per barrel. Overall, total expenses were down year-over-year driven primarily by a large reduction in impairments, lower exploration expense and lower brokered natural gas costs. The lowered brokered costs were the result of lower activity; however, the margin remained strong due to the price environment. These declines were slightly offset by increases due to higher pricing (taxes other than income), increased compliance costs related to the Sarbanes-Oxley Act of 2002 (general and administrative), along with higher benefit costs (direct operations, general and administrative, stock compensation).

For the year, Cabot reported a 172 percent reserve replacement and production of 84.8 Bcfe. "The decline in year-over-year production was somewhat magnified by Hurricane Ivan, delays with certain well completions and asset sales late in 2003 that would have provided approximately 2.3 Bcfe to 2004," stated Dinges. "While I am a little disappointed with the overall production level, our natural gas production continued to show improvement year-over-year. However, we do continue to experience liquid declines primarily in our south Louisiana portfolio." Dinges commented, "Also affecting the decline is our decision to increase investment in our long-life portfolio and to more selectively invest in our short-life portfolio. This selective investment has been driven by our focus on capital efficiency, which also led to the repurchase of 405,100 shares of our stock."

Fourth Quarter

The Company also established a new fourth quarter record for net income, cash flow from operations and discretionary cash flow. Net income reached $32.2 million, or $0.99 per share, versus $19.2 million, or $0.60 per share in the fourth quarter of 2003, which was the previous record. The cash flow comparisons between fourth quarters included $57.1 million for 2004 versus $35.4 million for 2003 for cash flow from operations and $83.0 million for 2004 versus $71.7 million for 2003 for discretionary cash flow.

Higher realized commodity prices led to the record level performance. The resulting increase in revenue was offset partially by pressure on nearly every expense category with compliance costs and benefit costs leading the way.

Selected Items

Those selected items impacting the fourth quarter of 2004 included primarily the change in derivative fair value. Impacting the full-year comparison included primarily an impairment of long-lived assets in 2003 along with the change in derivative fair value in 2003 and 2004. Taking these into account, the result is a fourth quarter net income before selected items of $25.3 million versus the $32.2 million reported. For the year the results are $91.8 million versus the $88.4 million reported. (See the complete buildup of these figures in the attached Selected Item Table.) "Even with considering these selected items, we still have record performance for both the fourth quarter and full-year," added Dinges.

Outlook

"For 2005, we expect another good year for commodity pricing and as such we have protected less than half of our anticipated equivalent production through the use of derivatives," commented Dinges. "Much of this protected volume is covered by wide collars, some of which have a ceiling in excess of $10 per mcf. Due to strength in the commodity price, anticipated increase in our production profile, and a large number of opportunities, we will have yet again our largest program with about 300 wells (200 in the East), in addition to budgeting for debt repayment and stock repurchase."

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2004 year-end/fourth quarter financial and operating results discussion with financial analysts on Tuesday, February 22, at 9:30 AM EDT (8:30 AM CDT) at www.cabotog.com. A teleconference replay will also be available at (800) 642-1687, (U.S./Canada) or (706) 645-9291 (International), passcode 3378135. A replay will be available from Wednesday, February 23 through Tuesday, March 1, 2005. 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 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 substantial interests in the Gulf Coast, including Texas and Louisiana; the West, with the Rocky Mountains and Mid-Continent; the East and a new position in Canada. For additional information, visit the Company's Internet homepage at www.cabotog.com.

Forward-Looking Statements

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.



                                OPERATING DATA

                                         Quarter Ended    Twelve-Months Ended
                                          December 31,       December 31,
                                          2004    2003       2004    2003
       PRODUCED NATURAL GAS (Bcf) & OIL
        (MBbl)
       Natural Gas
         Gulf
          Coast                             7.7     7.7      31.3    29.5
         West                               5.6     5.8      21.9    23.8
         East                               5.1     4.7      19.4    18.6
         Canada                             0.2      --       0.2      --
         Total                             18.6    18.2      72.8    71.9

       Crude/Condensate/Ngl
         Gulf
          Coast                             411     564     1,809   2,625
         West                                40      43       163     193
         East                                 7       7        27      27
         Canada                               2      --         3      --
         Total                              460     614     2,002   2,845

       Equivalent
        Production (Bcfe)                  21.3    21.9      84.8    89.0

       PRICES
       Average Produced Gas Sales Price
        ($/Mcf)
         Gulf
          Coast                           $5.55   $4.61     $5.27   $4.78
         West                             $4.83   $3.72     $4.75   $3.67
         East                             $6.13   $5.09     $5.60   $5.15
         Canada                           $4.69   $  --     $4.69   $  --
         Total                            $5.49   $4.45     $5.20   $4.51

       Crude/Condensate Price ($/Bbl)
         Gulf
          Coast                          $30.52  $29.43    $30.67  $29.48
         West                            $47.18  $30.23    $40.29  $30.11
         East                            $44.95  $44.90    $38.28  $32.65
         Canada                          $37.93  $   --    $37.93  $   --
         Total                           $32.18  $29.65    $31.55  $29.55

       WELLS DRILLED
         Gross                               51      50       256     173
         Net                                 41      33       220     132
         Gross Success Rate                  90%     86%       95%     89%



          CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
                   (In thousands, except per share amounts)

                                          Quarter Ended    Twelve-Months Ended
                                           December 31,        December 31,
                                          2004     2003      2004      2003
       Operating Revenues
         Natural Gas Production (1)     $103,143  $79,715  $379,661  $322,556
         Brokered Natural Gas             24,005   21,887    84,416    95,816
         Crude Oil and Condensate (1)     25,189   15,942    60,022    81,040
         Other                             2,302    3,704     6,309     9,979
                                         154,639  121,248   530,408   509,391
       Operating Expenses
         Brokered Natural Gas Cost        21,273   19,760    75,217    86,162
         Direct Operations - Field and
          Pipeline                        15,092   14,377    53,581    50,399
         Exploration                      15,439   15,066    48,130    58,119
         Depreciation, Depletion and
          Amortization                    28,538   26,322   113,488   104,251
         Impairment of Long-Lived
          Assets                              --       --     3,458    93,796
         General and Administrative        8,512    6,159    28,198    23,495
         Stock Compensation (2)              924      384     6,537     1,617
         Taxes Other Than Income          10,884    8,962    41,022    37,138
                                         100,662   91,030   369,631   454,977
       Gain (Loss) on Sale of Assets        (131)   4,580      (124)   12,173
       Income from Operations             53,846   34,798   160,653    66,587
       Interest Expense and Other          5,630    5,887    22,029    23,545
       Income Before Income Taxes         48,216   28,911   138,624    43,042
       Income Tax Expense                 15,989    9,680    50,246    15,063
       Net Income Before Cumulative
        Effect of Accounting Change       32,227   19,231    88,378    27,979
       Cumulative Effect of Accounting
        Change (3)                            --       --        --    (6,847)
       Net Income                        $32,227  $19,231   $88,378   $21,132
       Net Earnings Per Share - Basic      $0.99    $0.60     $2.72     $0.66
       Average Common Shares
        Outstanding                       32,481   32,197    32,488    32,050

     (1)  See the "Impact of Mark-to-Market Accounting Requirements" table for
          additional information.
     (2)  Includes the impact of the Company's performance share
          mark-to-market requirement and restricted stock amortization.
     (3)  Cumulative effect of accounting change relates to the adoption of
          SFAS 143, "Accounting for Asset Retirement Obligations."



               CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                (In thousands)

                                        December 31,   December 31,
                                           2004            2003
      Assets
      Current Assets                      $194,679       $143,331
      Property, Equipment and
       Other Assets                      1,001,422        902,805
      Deferred Income Taxes                 14,855          8,920
         Total Assets                   $1,210,956     $1,055,056

      Liabilities and
       Stockholders' Equity
      Current Liabilities                 $196,889       $156,527
      Long-Term Debt                       250,000        270,000
      Deferred Income Taxes                247,376        208,955
      Other Liabilities                     61,029         54,377
      Stockholders' Equity                 455,662        365,197
         Total Liabilities and
          Stockholders' Equity          $1,210,956     $1,055,056



          CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
                                (In thousands)

                                   Quarter Ended       Twelve-Months Ended
                                    December 31,           December 31,
                                 2004        2003        2004       2003
      Cash Flows From
       Operating Activities
      Net Income               $32,227     $19,231     $88,378     $21,132
      Cumulative Effect of
       Accounting Change            --          --          --       6,847
      Change in Derivative
       Fair Value              (11,292)      3,371       2,003       3,347
      Impairment of Long-
       Lived Assets                 --          --       3,458      93,796
      Income Charges Not
       Requiring Cash           29,234      26,315     119,448     105,136
      (Gain) / Loss on Sale
       of Assets                   131      (4,580)        124     (12,173)
      Deferred Income Taxes     17,264      12,339      32,713      (9,837)
      Changes in Assets and
       Liabilities             (25,908)    (36,362)    (21,232)    (24,729)
      Exploration Expense       15,439      15,066      48,130      58,119
      Net Cash Provided by
       Operations               57,095      35,380     273,022     241,638

      Cash Flows From
       Investing Activities
      Capital Expenditures     (49,599)    (36,633)   (207,346)   (122,018)
      Proceeds from Sale of
       Assets                      (67)     10,100         119      28,281
      Restricted Cash               --      15,761          --          --
      Exploration Expense      (15,439)    (15,066)    (48,130)    (58,119)
      Net Cash Used by
       Investing               (65,105)    (25,838)   (255,357)   (151,856)

      Cash Flows From
       Financing Activities
      Sale of Common Stock
       Proceeds                  1,351         877      12,474       6,728
      Decrease in Debt              --     (12,345)         --     (92,345)
      Purchase of Treasury
       Stock                    (6,899)         --     (15,631)         --
      Dividends Paid            (1,300)     (1,288)     (5,206)     (5,043)
      Net Cash Used by
       Financing                (6,848)    (12,756)     (8,363)    (90,660)

      Net Increase (Decrease)
       in Cash and
        Cash Equivalents      $(14,858)    $(3,214)     $9,302       $(878)


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

                   (In thousands, except per share amounts)

                                          Quarter Ended   Twelve-Months Ended
                                           December 31,       December 31,
                                          2004     2003      2004      2003
     As Reported - Net Income           $32,227  $19,231   $88,378   $21,132
     Reversal of Selected Items,
      Net of Tax:
         Impairment of Long-Lived
          Assets                             --       --     2,139    58,060
         (Gain) Loss on Sale of Assets       81   (2,835)       77    (7,535)
         Change in Derivative Fair
          Value                          (6,985)   2,087     1,239     2,072
         Cumulative Effect of
          Accounting Change                  --       --        --     6,847
     Net Income Including Reversal
      of Selected Items                 $25,323  $18,483   $91,833   $80,576
     As Reported - Net Earnings Per
      Share                               $0.99    $0.60     $2.72     $0.66
     Per Share Impact of Reversing
      Selected Items                      (0.21)   (0.03)     0.11      1.85
     Net Earnings Per Share
      Including Reversal of
      Selected Items                      $0.78    $0.57     $2.83     $2.51
     Average Common Shares
      Outstanding                        32,481   32,197    32,488    32,050



            Discretionary Cash Flow Calculation and Reconciliation
                                (In thousands)

                                          Quarter Ended   Twelve-Months Ended
                                           December 31,       December 31,
                                          2004     2003      2004      2003
     Discretionary Cash Flow
     As Reported - Net Income           $32,227  $19,231   $88,378   $21,132
     Plus:
     Cumulative Effect of Accounting
      Change                                 --       --        --     6,847
     Change in Derivative Fair Value    (11,292)   3,371     2,003     3,347
     Impairment of Long-Lived Assets         --       --     3,458    93,796
     Income Charges Not Requiring
      Cash                               29,234   26,315   119,448   105,136
     (Gain) / Loss on Sale of Assets        131   (4,580)      124   (12,173)
     Deferred Income Taxes               17,264   12,339    32,713    (9,837)
     Exploration Expense                 15,439   15,066    48,130    58,119
     Discretionary Cash Flow             83,003   71,742   294,254   266,367
     Plus: Changes in Assets and
      Liabilities                       (25,908) (36,362)  (21,232)  (24,729)
     Net Cash Provided by Operations    $57,095  $35,380  $273,022  $241,638



               Impact of Mark-to-Market Accounting Requirements
                                (In thousands)
                                         Quarter Ended     Twelve-Months Ended
                                          December 31,        December 31,
                                         2004     2003        2004      2003
      Unrealized Gain (Loss) on
       Derivatives (1)
         Natural Gas                    $983    $(1,144)      $914    $(1,468)
         Crude Oil                    10,309     (2,227)    (2,917)    (1,879)

      Incentive Stock
       Compensation Expense (2)
         Performance Shares              (26)        --     (3,184)        --
      Mark-to-Market Impact,
       Before Income Tax             $11,266    $(3,371)   $(5,187)   $(3,347)
      Mark-to-Market Impact,
       Income Tax                     (4,297)     1,284      1,978      1,275
      Mark-to-Market Impact on
       Net Income                     $6,969    $(2,087)   $(3,209)   $(2,072)

      (1)  These amounts represent the unrealized gain (loss) associated with
           the mark-to-market valuation of open positions which do not qualify
           for hedge accounting or are potentially ineffective.  These amounts
           are reflected in the respective line items of Operating Revenues.
           Therefore, the computation of our reported realized commodity
           prices can be obtained by adding (subtracting) the loss (gain) from
           the respective Operating Revenues line item and dividing by
           reported production.

      (2)  This amount relates to the mark-to-market valuation of the
           Company's performance share incentive stock compensation awards
           that is reflected in general and administrative expense.  At
           December 31, 2004 the Company recognized stock compensation expense
           based on Cabot's ranking against a predetermined peer group based
           on total shareholder return.  Cabot must calculate its liability at
           the balance sheet date under the assumption that its relative
           ranking remains constant throughout the measurement period (January
           1, 2004 - December 31, 2006), creating an assumed ultimate
           liability which is then amortized over the measurement period
           (percent payout multiplied by shares multiplied by stock price at
           reported balance sheet date multiplied by the pro-rata time expired
           in the measurement period).  Expense recognition will fluctuate
           between reporting periods due to the valuation of the performance
           shares at the reported balance sheet date.


SOURCE  Cabot Oil & Gas
    -0-                             02/21/2005
    /CONTACT:  Scott Schroeder of Cabot Oil & Gas, +1-281-589-4993/
    /Web site:  http://www.cabotog.com /
    (COG)

CO:  Cabot Oil & Gas
ST:  Texas
IN:  OIL
SU:  ERN ERP CCA

ER-AC
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8264 02/21/2005 18:00 EST http://www.prnewswire.com