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Cabot Oil & Gas Reports Record Third Quarter Net Income, Along With Production Gains
Oct 26, 2006

HOUSTON, Oct. 26 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced record third quarter net income, which was a record even before recording a $143.6 million after-tax gain from the strategic sale of its offshore and south Louisiana assets that closed September 29, 2006. Reported financial results for the quarter included net income of $189.0 million or $3.92 per share, cash flow from operations of $86.7 million and discretionary cash flow of $21.5 million. The discretionary cash flow figure was reduced by a $101.4 million tax provision related to the asset sale, to be funded from the sale proceeds.

Results for the quarter, after removing the benefit of the sale, would have been: net income of $45.4 million, or $0.94 per share, cash flow from operations of $86.7 million (unchanged) and discretionary cash flow of $122.9 million, all record levels for the third quarter. These results compare favorably to last year's third quarter reported numbers of $33.8 million, or $0.69 per share, $59.0 million and $92.9 million for net income, earnings per share, cash flow from operations and discretionary cash flow, respectively.

Driving the positive results was a 12 percent increase in production, along with increases in oil price realizations. "Each region continues to contribute to the equivalent production increase," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "I am pleased with our production growth and our existing hedge position that improved our gas price realizations by $0.41 per Mcf in the softening commodity price environment we experienced in the third quarter."

For the quarter, natural gas price realizations were essentially flat at $6.76 per Mcf compared to last year's third quarter. Oil prices improved 52 percent to $69.80 per barrel as the absolute oil price strengthened between periods.

The quarterly expense comparison indicates increases in year-over-year direct operations expense, DD&A, G&A expense and interest expense. This was offset by reductions in exploration, stock compensation, brokered natural gas cost and other taxes. The net effect to expenses was an increase of eight percent, in line with expectations.

"The third quarter built on the production momentum we experienced in the second quarter," commented Dinges. "Our fourth quarter production profile will reflect the results of our recent divestiture, but production coming from our remaining Gulf Coast assets is expected to increase in the fourth quarter."

Year-to-Date

The reported numbers year-to-date were $289.0 million for net income, $356.1 million for cash flow from operations and $251.0 million for discretionary cash flow (which includes $101.4 million reduction due to the sale). Without the gain on the sale, these results would have been $145.4, $356.1 (unchanged), and $352.4 million, respectively, which compares to $89.9, $247.1, and $255.2 million for last year's comparable period.

For the nine-months of 2006, Cabot's $145.4 million net income level before the asset sale nearly matched the 2005 full year net income of $148.4 million, which is the current record annual net income level for the Company. Driving the results was an eight percent increase in production, a 17 percent increase in natural gas price realizations and a 51 percent increase in oil price realizations, offset by cost increases.

"Cabot is establishing itself as an industry leader in pure organic production growth," added Dinges. "Though we have sold our non-core south Louisiana and offshore properties, we still expect to see absolute production growth in 2006."

Because of the sale closing at the end of the quarter, Cabot was unable to reduce its debt until early October. Accordingly, the debt balance at September 30, 2006 was $400.0 million with $322.1 million in cash and $909.8 million in equity, giving Cabot a net debt to adjusted total capitalization ratio of 7.9 percent (see attached reconciliation for details of this measurement).

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2006 third quarter financial and operating results discussion with financial analysts on Thursday, October 26, at 4:00pm EDT (3:00pm CDT) at www.cabotog.com. A teleconference replay will also be available at (800) 642-1687, (U.S./Canada) or (706) 645-9291 (International), pass code 7016094. A replay will be available through Saturday, October 28, 2006. 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 substantial interests onshore Gulf Coast; the West, with the Rocky Mountains and Mid-Continent; the East and 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  Nine Months Ended
                                              September 30,   September 30,
                                              2006    2005    2006    2005
        PRODUCED NATURAL GAS (Bcf)
         & OIL (MBbl)
        Natural Gas
          Gulf Coast                           8.0     6.3    23.9    21.0
          West                                 6.2     5.9    17.3    17.3
          East                                 5.8     5.5    17.5    15.7
          Canada                               0.7     0.3     1.8     0.8
          Total                               20.7    18.0    60.5    54.8

        Crude/Condensate/Ngl
          Gulf Coast                           321     364   1,025   1,191
          West                                  54      45     167     127
          East                                   6       7      19      20
          Canada                                 1       5       8      14
          Total                                382     421   1,219   1,352

        Equivalent Production (Bcfe)          23.0    20.5    67.8    62.9

        PRICES
        Average Produced Gas Sales Price
         ($/Mcf)
          Gulf Coast                         $7.13   $6.67   $7.41   $6.26
          West                               $5.84   $5.91   $6.19   $5.38
          East                               $7.41   $7.75   $8.09   $6.90
          Canada                             $5.09   $8.04   $6.10   $5.95
          Total(1)                           $6.76   $6.77   $7.22   $6.16

        Crude/Condensate Price ($/Bbl)
          Gulf Coast                        $70.10  $43.93  $66.71  $42.72
          West                              $68.53  $60.77  $64.99  $54.21
          East                              $64.67  $59.22  $63.29  $52.98
          Canada                            $69.53  $52.94  $65.90  $42.23
          Total(1)                          $69.80  $46.05  $66.42  $43.92

        WELLS DRILLED
          Gross                                110      88     301     229
          Net                                   92      72     248     177
          Gross Success Rate                    96%     97%     97%     95%

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



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

                                         Quarter Ended      Nine Months Ended
                                         September 30,        September 30,
                                         2006      2005      2006      2005
       Operating Revenues
         Natural Gas Production        $140,261  $121,477  $436,931  $337,566
         Brokered Natural Gas            17,075    18,756    67,389    60,768
         Crude Oil and Condensate        26,435    21,336    80,283    57,250
         Other                              973       188     5,703     2,131
                                        184,744   161,757   590,306   457,715
       Operating Expenses
         Brokered Natural Gas Cost       15,282    16,550    59,924    53,549
         Direct Operations - Field and
          Pipeline                       19,893    14,246    55,478    43,171
         Exploration                     13,561    16,665    39,972    47,396
         Depreciation, Depletion and
          Amortization                   35,914    30,670   108,104    90,492
         General and Administrative
          (excluding Stock-Based
          Compensation)                   7,566     5,417    26,295    20,510
         Stock-Based Compensation (1)     3,149     4,262    11,784     6,829
         Taxes Other Than Income         14,366    14,939    44,439    37,053
                                        109,731   102,749   345,996   299,000
       Gain on Sale of Assets (3)       229,733        15   229,944        74
       Income from Operations           304,746    59,023   474,254   158,789
       Interest Expense and Other         6,978     5,339    19,151    15,461
       Income Before Income Taxes and
        Cumulative Effect of
        Accounting Change               297,768    53,684   455,103   143,328
       Income Tax Expense               108,748    19,928   165,651    53,388
       Income Before Cumulative Effect
        of Accounting Change            189,020    33,756   289,452    89,940
       Cumulative Effect of Accounting
        Change, Net of Tax (2)               --        --      (403)       --
       Net Income                      $189,020   $33,756  $289,049   $89,940
       Net Earnings Per Share - Basic     $3.92     $0.69     $5.95     $1.84
       Weighted Average Common Shares
        Outstanding                      48,230    48,951    48,548    48,865

    (1)  Includes the impact of the Company's performance share and restricted
         stock amortization.  In addition, the 2006 figure
         includes expense related to stock options and stock appreciation
         rights following the adoption of SFAS 123(R).

    (2)  Cumulative effect of accounting change relates to the adoption of
         SFAS No. 123(R), "Share Based Payment (revised 2004)."

    (3)  Gain on Sale of Assets is primarily due to the sale of offshore and
         certain south Louisiana properties.



                  CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                    (In thousands)

                                               September 30,      December 31,
                                                    2006               2005
       Assets
       Current Assets                             $547,007           $230,312
       Property, Equipment and Other Assets      1,407,763          1,245,471
       Deferred Income Taxes                        25,190             19,587
          Total Assets                          $1,979,960         $1,495,370

       Liabilities and Stockholders' Equity
       Current Liabilities                        $305,543           $218,584
       Long-Term Debt                              380,000            320,000
       Deferred Income Taxes                       330,855            289,381
       Other Liabilities                            53,778             67,194
       Stockholders' Equity                        909,784            600,211
          Total Liabilities and
           Stockholders' Equity                 $1,979,960         $1,495,370



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

                                         Quarter Ended      Nine Months Ended
                                          September 30,       September 30,
                                         2006      2005      2006       2005
        Cash Flows From Operating
         Activities
        Net Income                     $189,020   $33,756  $289,049   $89,940
        Cumulative Effect of
         Accounting Change                   --        --       403        --
        Unrealized (Gain) / Loss on
         Derivatives                         --    (1,630)       --     2,051
        Income Charges Not Requiring
         Cash                            39,141    34,977   119,963    97,646
        Gain on Sale of Assets         (229,733)      (15) (229,944)      (74)
        Deferred Income Tax Expense       9,482     9,147    31,514    18,225
        Changes in Assets and
         Liabilities                     66,078   (33,865)  110,849    (8,073)
        Stock-Based Compensation Tax
         Benefit                           (859)       --    (5,756)       --
        Exploration Expense              13,561    16,665    39,972    47,396
        Net Cash Provided by
         Operations                      86,690    59,035   356,050   247,111

        Cash Flows From Investing
         Activities
        Capital Expenditures           (120,157) (125,656) (344,620) (241,504)
        Proceeds from Sale of Assets    322,412       286   322,987       996
        Exploration Expense             (13,561)  (16,665)  (39,972)  (47,396)
        Net Cash Provided by / (Used
         in) Investing                  188,694  (142,035)  (61,605) (287,904)

        Cash Flows From Financing
         Activities
        Sale of Common Stock Proceeds     1,056       508     3,620     4,088
        Net Increase in Debt             50,000    10,000    60,000    10,000
        Increase in Book Overdrafts          --    25,691        --    25,691
        Purchase of Treasury Stock      (19,305)       --   (46,492)     (571)
        Stock-Based Compensation Tax
         Benefit                            859        --     5,756        --
        Dividends Paid                   (1,930)   (1,958)   (5,832)   (5,254)
        Net Cash Provided by Financing   30,680    34,241    17,052    33,954

        Net Increase / (Decrease) in
         Cash and Cash Equivalents     $306,064  $(48,759) $311,497   $(6,839)



       Selected Item Review and Reconciliation of Net Income and Earnings Per
                                       Share
                      (In thousands, except per share amounts)

                                           Quarter Ended    Nine Months Ended
                                           September 30,      September 30,
                                           2006     2005      2006     2005

         As Reported - Net Income        $189,020  $33,756  $289,049  $89,940
         Reversal of Selected Items, Net
          of Tax:
              Gain on Sale of Assets     (143,675)     (10) (143,806)     (46)
              Unrealized (Gain) /
              Loss on Derivatives              --   (1,012)       --    1,265
              Cumulative Effect of
                Accounting Change              --       --       403       --
         Net Income Including Reversal
          of Selected Items               $45,345  $32,734  $145,646  $91,159
         As Reported - Net Earnings Per
          Share                             $3.92    $0.69     $5.95    $1.84
         Per Share Impact of Reversing
          Selected Items                    (2.98)   (0.02)    (2.95)    0.03
         Net Earnings Per Share
          Including Reversal of Selected
          Items                             $0.94    $0.67     $3.00    $1.87
         Weighted Average Common Shares
          Outstanding                      48,230   48,951    48,548   48,865



               Discretionary Cash Flow Calculation and Reconciliation
                                   (In thousands)

                                          Quarter Ended    Nine Months Ended
                                          September 30,      September 30,
                                         2006      2005      2006      2005
         Discretionary Cash Flow
         As Reported - Net Income       $189,020  $33,756  $289,049   $89,940
         Plus:
         Cumulative Effect of
          Accounting Change                   --       --       403        --
         Unrealized (Gain) / Loss on
          Derivatives                         --   (1,630)       --     2,051
         Income Charges Not Requiring
          Cash                            39,141   34,977   119,963    97,646
         Gain on Sale of Assets         (229,733)     (15) (229,944)      (74)
         Deferred Income Tax Expense       9,482    9,147    31,514    18,225
         Exploration Expense              13,561   16,665    39,972    47,396
         Discretionary Cash Flow          21,471   92,900   250,957   255,184
         Plus:  Changes in Assets and
          Liabilities                     66,078  (33,865)  110,849    (8,073)
         Less:  Stock-Based
          Compensation Tax Benefit          (859)      --    (5,756)       --
         Net Cash Provided by
          Operations                     $86,690  $59,035  $356,050  $247,111



                              Net Debt Reconciliation
                                   (In thousands)

                                                 September 30,    December 31,
                                                      2006            2005

         Current Portion of Long-Term Debt           $20,000          $20,000
         Long-Term Debt                              380,000          320,000
              Total Debt                            $400,000         $340,000
         Stockholders' Equity                        909,784          600,211
              Total Capitalization                $1,309,784         $940,211

         Total Debt                                 $400,000         $340,000
         Less:  Cash and Cash Equivalents           (322,123)         (10,626)
              Net Debt                               $77,877         $329,374

         Net Debt                                    $77,877         $329,374
         Stockholders' Equity                        909,784          600,211
              Total Adjusted
               Capitalization                       $987,661         $929,585

         Total Debt to Total Capitalization Ratio       30.5%            36.2%
         Less:  Impact of Cash and Cash Equivalents     22.6%             0.8%
              Net Debt to Adjusted Capitalization
               Ratio                                     7.9%            35.4%

SOURCE Cabot Oil & Gas Corporation
10/26/2006

CONTACT: Scott Schroeder, +1-281-589-4993, for Cabot Oil & Gas Corporation

3912 10/26/2006 14:07 EDT http://www.prnewswire.com