News Release

<< Back
Cabot Oil & Gas Reports Record Second Quarter Net Income; Growing Production in East Region
Jul 29, 2004

HOUSTON, Jul 29, 2004 /PRNewswire-FirstCall via COMTEX/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced quarterly net income of $19.3 million, or $0.59 per share, surpassing by 8 percent last year's second quarter record when Cabot reported net income of $17.9 million, or $0.56 per share. In terms of cash flow comparisons, the Company reported discretionary cash flow of $60.2 million versus $62.5 million in last year's comparable quarter, essentially flat with last year's record level. Cash flow from operations was $45.7 million, down from the $80.3 million reported in the same period last year due entirely to changes in assets and liabilities between periods.

Contributing to the improvement in net income were higher realized commodity prices, the impact of which was offset somewhat by lower production levels primarily in crude oil, and lower overall expenses. For the quarter, natural gas price realizations increased 12 percent to $5.02 per Mcf compared to last year's second quarter, while oil realizations were $31.10 compared to $29.27 per barrel. Production in the second quarter was 20.7 Bcfe compared to 22.3 Bcfe in last year's comparable quarter, consistent in total with published guidance. While down overall, the Company saw gains in natural gas production in its East and Gulf Coast regions between comparable periods.

"I am pleased with the continued growth coming from our East region drilling program and the larger diversity we are seeing in our Gulf Coast production profile," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "The West region's production profile continues to be impacted by declines in expenditures in 2002 and 2003. We are pleased, however, by our exploration success in the region that (assuming timely permitting) is expected to have a positive impact on production later in 2004 and in 2005. Our overall production is expected to ramp up during the third and fourth quarters."

Lower natural gas brokering activity and reduced exploration expense, resulting from lower dry hole expense and a smaller investment in seismic for the quarter, were the main contributors to the quarter's lower expense amount. Offsetting part of the cost savings was higher general and administrative (G&A) expense, primarily due to a $2.2 million increase in stock compensation expense and an incremental $0.7 million in compliance costs for Sarbanes-Oxley Section 404. Stock compensation includes $1.8 million associated with the mark-to-market accounting treatment for performance shares awarded by the Company to employees in lieu of stock options.

"Our goal has been to align our compensation programs with our shareholders and the advent of performance shares accomplishes this objective," commented Dinges. "These shares vest at the end of three years and provide payout, (between zero and 200 percent) measured against a predetermined group of peers in total shareholder return. With the stock's recent upward movement, Cabot ranks favorably among its peer group, determining the level of the expense."

During the second quarter, the Company reinitiated its stock repurchase program. Cabot bought 158,100 shares at an average price of $33.79 per share in the open market. "This will remain a focus of our investment strategy, especially when compared to the deal economics in the current marketplace," stated Dinges.

Year-to-Date

For the first six months of 2004 Cabot recorded net income of $38.3 million, or $1.18 per share, cash flow from operations of $143.3 million and discretionary cash flow of $132.5 million. Last year's first half results were a net loss of $21.3 million, or $.67 per share, cash flow from operations of $139.8 million and discretionary cash flow of $130.1 million. The 2003 six month period includes the first quarter effects of the Kurten field impairment and the adoption of SFAS No. 143 "Accounting for Asset Retirement Obligations," totaling $54.4 million and $6.8 million after tax, respectively.

At June 30, 2004, Cabot had long-term debt of $270 million, comprised of private placements with varying maturities, consistent with the year-end level for a debt to total capitalization ratio of 40.8 percent. The Company's cash position was $21.4 million at the end of the second quarter. "With the continued strength in prices and our solid financial position, we are increasing our capital program for 2004 to $228 million from $217 million," said Dinges. "So far $131.7 million has been reinvested in our business during the first six months of 2004."

Subsequent to the end of the quarter, Cabot added to its 2005 hedge position with the addition of a costless collar covering 10,000 Mmbtu per day of East region production at $5.25 per Mmbtu floor and an $8.75 per Mmbtu ceiling for all of 2005. Cabot also secured a range swap for oil during 2005 whereby the Company receives $42.50 per barrel unless the monthly average oil price is below $32 per barrel. The oil range swap covers 1,000 barrels of oil per day. "While we don't expect any significant weakness in commodity prices, we thought it was prudent to protect another layer of production at these levels," added Dinges.

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2004 second quarter financial and operating results discussion with financial analysts on Friday, July 30, at 9:30 AM EDT (8:30 AM CDT) at www.cabotog.com. A teleconference replay will also be available at (800) 642-1687 (international (706) 645-9291), passcode 8713083. A replay will be available through Friday, August 6, 2004.

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 an expansion effort 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    Six-Months Ended
                                               June 30,          June 30,
                                            2004     2003     2004     2003
        PRODUCED NATURAL GAS (Bcf) & OIL (MBbl)
        Natural Gas
          Gulf Coast                         7.6      7.4     15.2     14.1
          West                               5.2      6.0     10.8     12.1
          East                               4.9      4.6      9.3      9.0
          Total                             17.7     18.0     35.3     35.2

        Crude/Condensate
          Gulf Coast                         450      648      940    1,344
          West                                42       51       83      100
          East                                 7        7       14       13
          Total                              499      706    1,037    1,457

        Natural Gas Liquids                    5        6        9       35

        Equivalent Production (Bcfe)        20.7     22.3     41.6     44.2

        PRICES
        Average Produced Gas Sales Price
         ($/Mcf)
          Gulf Coast                       $5.12    $4.96    $5.13    $4.92
          West                             $4.64    $3.60    $4.74    $3.61
          East                             $5.29    $4.92    $5.53    $5.13
          Total                            $5.02    $4.50    $5.12    $4.52

        Crude/Condensate Price ($/Bbl)
          Gulf Coast                       30.43   $29.30   $30.57   $30.10
          West                            $37.37   $28.47   $35.89   $30.22
          East                            $36.41   $31.83   $34.17   $29.05
          Total                           $31.10   $29.27   $31.04   $30.10

        WELLS DRILLED
          Gross                               92       43      130       68
          Net                                 84       37      113       56
          Gross Success Rate                  97%      95%      98%      93%


             CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
                      (In Thousands, Except Per Share Amounts)


                                          Quarter Ended     Six-Months Ended
                                             June 30,            June 30,
                                          2004     2003      2004      2003
       Operating Revenues
         Natural Gas Production         $90,028  $80,576  $180,407  $158,287
         Brokered Natural Gas            15,628   23,370    47,187    55,220
         Crude Oil and Condensate        13,552   20,550    26,319    43,642
         Other                              534    2,260     2,433     5,523
                                        119,742  126,756   256,346   262,672
       Operating Expenses
         Brokered Natural Gas Cost       13,596   21,539    42,317    49,800
         Direct Operations - Field and
          Pipeline                       13,114   13,825    25,192    24,751
         Exploration                      9,568   15,663    25,712    29,054
         Depreciation, Depletion and
          Amortization                   27,350   26,101    54,162    51,945
         Impairment of Long-Lived
          Assets                             --       --        --    87,926
         General and Administrative       9,582    6,172    16,298    12,767
         Taxes Other Than Income          9,921    8,651    20,023    18,875
                                         83,131   91,951   183,704   275,118
       Gain (Loss) on Sale of Assets       (172)      45      (113)      605
       Income (Loss) from Operations     36,439   34,850    72,529   (11,841)
       Interest Expense and Other         5,445    5,952    10,822    11,577
       Income (Loss) Before Income
        Taxes                            30,994   28,898    61,707   (23,418)
       Income Tax Expense (Benefit)      11,676   10,994    23,378    (8,946)
       Net Income (Loss) Before
        Cumulative Effect of
        Accounting Change                19,318   17,904    38,329   (14,472)
       Cumulative Effect of Accounting
        Change (1)                           --       --        --    (6,847)
       Net Income (Loss)                $19,318  $17,904   $38,329  $(21,319)
       Net Earnings (Loss) Per Share -
        Basic                             $0.59    $0.56     $1.18    $(0.67)
       Average Common Shares
        Outstanding                      32,526   31,980    32,462    31,909

       (1)  Cumulative effect of accounting change relates to the adoption of
            SFAS 143, "Accounting for Asset Retirement Obligations."


                 CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                   (In Thousands)
                                                    June 30,       Dec. 31,
                                                      2004           2003
       Assets
       Current Assets                               $166,862       $143,018
       Property, Equipment
        and Other Assets                             955,982        902,805
       Deferred Income Taxes                          14,159          8,813
          Total Assets                            $1,137,003     $1,054,636

       Liabilities and Stockholders'
        Equity
       Current Liabilities                          $186,296       $156,214
       Long-Term Debt                                270,000        270,000
       Deferred Income Taxes                         219,122        208,848
       Other Liabilities                              69,566         54,377
       Stockholders' Equity                          392,019        365,197
          Total Liabilities
           and Stockholders'
           Equity                                 $1,137,003     $1,054,636


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

                                          Quarter Ended     Six-Months Ended
                                             June 30,            June 30,
                                          2004     2003      2004       2003
        Cash Flows From Operating
         Activities
        Net Income (Loss)               $19,318  $17,904   $38,329  $(21,319)
        Cumulative Effect of
         Accounting Change                   --       --        --     6,847
        Change in Derivative Fair
         Value                              653      650     6,272     1,194
        Impairment of Long-Lived
         Assets                              --       --        --    87,926
        Income Charges Not Requiring
         Cash                            27,808   26,572    54,883    52,278
        Gain on Sale of Assets              172      (45)      113      (605)
        Deferred Income Taxes             2,632    1,762     7,181   (25,248)
        Changes in Assets and
         Liabilities                    (14,420)  17,751    10,811     9,677
        Exploration Expense               9,568   15,663    25,712    29,054
        Net Cash Provided by
         Operations                      45,731   80,257   143,301   139,804

        Cash Flows From Investing
         Activities
        Capital Expenditures            (66,719) (30,078) (102,430)  (51,399)
        Proceeds from Sale of Assets         22      758        22     2,360
        Exploration Expense              (9,568) (15,663)  (25,712)  (29,054)
        Net Cash Used by Investing      (76,265) (44,983) (128,120)  (78,093)

        Cash Flows From Financing
         Activities
        Sale of Common Stock Proceeds     6,812    1,960    13,468     2,458
        Decrease in Debt                     --  (34,000)       --   (61,000)
        Purchase of Treasury Stock       (5,342)      --    (5,342)       --
        Dividends Paid                   (1,306)  (1,195)   (2,602)   (2,468)
        Net Cash Provided (Used) by
         Financing                          164  (33,235)    5,524   (61,010)

        Net Increase (Decrease) in
         Cash and
          Cash Equivalents             $(30,370)  $2,039   $20,705      $701


          Selected Item Review and Reconciliation of Net Income (Loss) and
                             Earnings (Loss) Per Share
                      (In Thousands, Except Per Share Amounts)

                                            Quarter Ended   Six-Months Ended
                                               June 30,          June 30,
                                            2004     2003     2004      2003
         As Reported -- Net
          Income (Loss)                   $19,318  $17,904  $38,329  $(21,319)
         Reversal of Selected Items, Net
          of Tax:
          Impairment of Long-Lived Assets      --       --       --    54,338
          Cumulative Effect of Accounting
           Change                              --       --       --     6,847
         Net Income Including Reversal of
          Selected Items                  $19,318  $17,904  $38,329   $39,866
         As Reported -- Net Earnings
          (Loss) Per Share                  $0.59    $0.56    $1.18    $(0.67)
         Per Share Impact of Reversing
          Selected Items                       --       --       --      1.92
         Net Earnings Per Share Including
          Reversal of Selected Items        $0.59    $0.56    $1.18     $1.25
         Average Common Shares
          Outstanding                      32,526   31,980   32,462    31,909


               Discretionary Cash Flow Calculation and Reconciliation
                                   (In Thousands)

                                            Quarter Ended     Six-Months Ended
                                               June 30,           June 30,
                                            2004     2003      2004     2003
         Discretionary Cash Flow
         As Reported -- Net
          Income (Loss)                   $19,318  $17,904   $38,329 $(21,319)
         Plus:
         Cumulative Effect of Accounting
          Change                               --       --        --    6,847
         Change in Derivative Fair Value      653      650     6,272    1,194
         Impairment of Long-Lived Assets       --       --        --   87,926
         Income Charges Not Requiring
          Cash                             27,808    26,572   54,883   52,278
         Gain on Sale of Assets               172       (45)     113     (605)
         Deferred Income Taxes              2,632     1,762    7,181  (25,248)
         Exploration Expense                9,568    15,663   25,712   29,054
         Discretionary Cash Flow           60,151    62,506  132,490  130,127
         Plus:  Changes in Assets and
          Liabilities                     (14,420)   17,751   10,811    9,677
         Net Cash Provided by
          Operations                      $45,731   $80,257 $143,301 $139,804


                 Impact of Mark-to-Market Accounting Requirements
                                  (In Thousands)

                                         Quarter Ended      Six-Months Ended
                                           June 30,              June 30,
                                        2004      2003       2004       2003
      Unrealized Gain (Loss) on
       Derivatives (1)
         Natural Gas                   $1,306    $(536)     $(418)     $(999)
         Crude Oil                     (1,959)    (114)    (5,854)      (195)

      Incentive Stock Compensation
       Expense (2)
         Performance Shares            (1,781)      --     (1,781)        --
      Mark-to-Market Impact,
       Before Income Tax              $(2,434)   $(650)   $(8,053)   $(1,194)
      Mark-to-Market Impact,
       Income Tax                         927      248      3,068        455
      Mark-to-Market Impact on Net
       Income                         $(1,507)   $(402)   $(4,985)     $(739)

      (1) These amounts represent the ineffective gain (loss) associated with
          the mark-to-market valuation of open positions at June 30, 2004.
          These amounts are reflected in the respective line items of Net
          Operating  Revenues.  Therefore, the computation of our reported
          realized commodity prices can be obtained by adding (subtracting)
          the loss (gain) from the respective Net 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 June
          30, 2004 the Company recognized $1.8 million of 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 multplied 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 Corporation

Scott Schroeder of Cabot Oil & Gas Corporation,
+1-281-589-4993
http://www.cabotog.com