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Cabot Oil & Gas Reports Third Quarter Results
Oct 28, 2004

HOUSTON, Oct. 28 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced third quarter net income of $17.8 million, or $0.55 per share, compared to $22.7 million, or $0.70 per share, in last year's comparable quarter. Cash flow from operations in the third quarter increased to $70.1 million in 2004 from $65.9 million in 2003, while discretionary cash flow increased to $77.0 million in 2004 versus $63.9 million in 2003.

"Highlights for the quarter were increased equivalent production in each of our regions versus the 2004 second quarter and record third quarter level of operating cash flow," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "The net income figure, which was impacted by two non-cash items, does not reflect the full positive impact of the quarter. The largest impact was the $4.3 million after tax mark-to-market requirement (see attached Impact of Mark-to-Market Accounting Requirements for details) for derivatives that do not qualify for hedge accounting. The rules specify that the Company record not only the current period impact of derivatives, but also the impact on all future periods. These instruments cover a portion of Cabot's oil production. The other item was a $2.1 million after tax impairment of a two- well field in South Louisiana," added Dinges. Excluding the non-cash impact of the mark-to-market on derivative positions not qualifying as hedges, the impairment, and a small gain on the sale of assets, the net income comparison would have been $24.2 million, or $0.75 per share, versus $21.2 million, or $0.66 per share, for the third quarters of 2004 and 2003, respectively (see attached Selected Item Review and Reconciliation for details).

Increased natural gas production and higher realized commodity prices between comparable third quarter periods were offset by lower oil production and an unrealized mark-to-market loss on oil positions, resulting in an overall reduction to operating revenues between periods. On the expense side of the equation, lower exploration expense, interest expense, and brokered natural gas cost led the way to lower overall operating expenses between comparable third quarters. Of note, general and administrative expense continues to experience growing costs associated with Sarbanes-Oxley section 404 compliance in the amount of $0.6 million for the quarter, compared to zero last year. Also, the impact of the stock compensation plans (performance shares and restricted stock awards) has been separated from G&A for press release financial statement purposes to better reflect its impact. In addition, the mark-to-market impact of the performance shares is highlighted in an attached table.

"Operationally, I am pleased with our continued progress, particularly the increase in production quarter over quarter," stated Dinges. "While the Gulf of Mexico hurricanes did not dramatically impact the Company, we did shut-in, deferring approximately .5 Bcfe of production leading up to and immediately following the storm." Dinges added, "Our production guidance for the fourth quarter of 2004 has been adjusted to reflect higher expected oil volumes and lower gas volumes which have been impacted by completion delays on some of our outside operated properties, but we still anticipate sequential growth over the third quarter." New guidance for 2005 has been posted to the Company's website and will be discussed on the conference call on October 29.

Year-to-Date

For the nine months ended September 2004, Cabot reported net income of $56.2 million, or $1.73 per share, along with cash flow from operations of $215.9 million and discretionary cash flow of $211.3 million. These figures compare favorably with last year's nine month net income of $1.3 million, or $0.04 per share, cash flows from operations of $205.7 million and discretionary cash flow of $194.1 million.

Again, both time frames were impacted by some of the same non-cash selected items, (mark-to-market of derivatives and impairments). Taking these into account, the net income comparison would have been $66.5 million, or $2.05 per share, versus $61.5 million, or $1.92 per share last year, (see attached Selected Item Review and Reconciliation for details).

Higher realized commodity prices were offset by lower production for the comparable periods making revenues essentially flat. Removing the impairments, expenses were driven down by lower brokered natural gas costs, reduced exploration expenses and lower interest, which were partially offset by higher general and administrative, and depreciation, depletion and amortization expense.

"Last year, we were pleased to return to profitability following the first quarter impairment. This year, we have already surpassed our highest record net income for any year, highlighting the excellent results we are having both operationally and financially," commented Dinges.

During the third quarter of 2004, the Company continued to repurchase stock under its stock purchase program. Cabot bought 86,000 shares in the third quarter at an average price of $39.42 per share in the open market. Cabot has purchased 244,100 shares during 2004 at an average price of $35.77 per share in the open market. "Cabot will continue to focus on the repurchase of its stock as an investment strategy. We believe our stock is an attractive investment, especially when compared to the alternative investment opportunities in the current marketplace," stated Dinges.

Late in the third quarter, Cabot added to its hedge positions five natural gas collars and one oil collar covering production in 2005. The natural gas collars cover either the first quarter or entire year, while the oil collar is for the entire year. Prices range from a $4.75 by $7.00 per Mmbtu for a full-year Rocky Mountain collar to a $7.00 by $10.35 per Mmbtu for a first quarter Henry Hub trade. During this same time frame a full-year 2005 oil trade received a $40.00 floor and a $50.50 per barrel ceiling. Details of the entire 2005 hedge program can be accessed on the Company website at www.cabotog.com.

"Because of the volatility in the commodity markets and our recent experience with range swaps, we will target future hedge positions towards products that qualify for hedge accounting to avoid earnings swings of the magnitude we experienced in the third quarter," added Dinges.

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2004 third quarter financial and operating results discussion with financial analysts on Friday, October 29, 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 1430138. A replay will be available from Friday, October 29 through Friday, November 5, 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    Nine-Months Ended
                                         September 30,      September 30,
                                        2004      2003      2004      2003
    PRODUCED NATURAL GAS (Bcf)
     & OIL (MBbl)
    Natural Gas
     Gulf Coast                           8.4       7.7      23.6      21.8
     West                                 5.5       5.9      16.3      18.0
     East                                 5.0       4.9      14.3      13.9
     Canada                               0.0       0.0       0.0       0.0
     Total                               18.9      18.5      54.2      53.7

    Crude/Condensate
     Gulf Coast                           450       683     1,391     2,027
     West                                  37        46       120       146
     East                                   7         7        20        20
     Canada                                 1         0         1         0
     Total                                495       736     1,532     2,193

    Natural Gas Liquids                     1         3        10        38

    Equivalent Production (Bcfe)         21.9      22.9      63.5      67.1

    PRICES
    Average Produced Gas Sales
     Price ($/Mcf)
     Gulf Coast                         $5.26     $4.68     $5.17     $4.83
     West                               $4.68     $3.75     $4.72     $3.65
     East                               $5.19     $5.24     $5.41     $5.17
     Canada                             $4.39     $0.00     $4.39     $0.00
     Total                              $5.07     $4.53     $5.10     $4.53

    Crude/Condensate Price ($/Bbl)
     Gulf Coast                        $31.01    $28.32    $30.71    $29.50
     West                              $42.85    $29.75    $38.06    $30.07
     East                              $39.64    $28.02    $35.99    $28.67
     Canada                            $36.63     $0.00    $36.63     $0.00
     Total                             $32.03    $28.40    $31.36    $29.53

    WELLS DRILLED
     Gross                                 75        55       205       123
     Net                                   66        44       179        99
     Gross Success Rate                    95%       87%       97%       90%


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

                                    Quarter Ended        Nine-Months Ended
                                    September 30,          September 30,
                                 2004        2003      2004        2003
    Net Operating Revenues
     Natural Gas Production (1) $96,111     $84,555  $276,518     $242,841
     Brokered Natural Gas        13,224      18,709    60,411       73,929
     Crude Oil and
      Condensate (1)              8,514      21,455    34,833       65,098
     Other                        1,574         752     4,007        6,275
                                119,423     125,471   375,769      388,143
    Operating Expenses
     Brokered Natural Gas Cost   11,627      16,602    53,944       66,402
     Direct Operations -
      Field and Pipeline         13,297      11,271    38,489       36,022
     Exploration                  6,979      13,999    32,691       43,053
     Depreciation, Depletion
      and Amortization           30,788      25,984    84,950       77,929
     Impairment of Long-
      Lived Assets                3,458       5,870     3,458       93,796
     General and Administrative   6,506       5,419    19,686       17,336
     Stock Compensation (2)       2,495         383     5,613        1,233
     Taxes Other Than Income     10,115       9,301    30,138       28,176
                                 85,265      88,829   268,969      363,947
    Gain on Sale of Assets          120       6,988         7        7,593
    Income from Operations       34,278      43,630   106,807       31,789
    Interest Expense and Other    5,577       6,972    16,399       18,549
    Income Before Income Taxes   28,701      36,658    90,408       13,240
    Income Tax Expense           10,879      13,990    34,257        5,044
    Net Income Before
     Cumulative Effect of
      Accounting Change          17,822      22,668    56,151        8,196
    Cumulative Effect of
     Accounting Change (3)           --          --        --       (6,847)
    Net Income                  $17,822     $22,668   $56,151       $1,349
    Net Earnings Per
     Share - Basic                $0.55       $0.70     $1.73        $0.04
    Average Common Shares
     Outstanding                 32,548      32,179    32,491       32,000

    (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)
                                                 September 30,        Dec. 31,
                                                    2004               2003
       Assets
       Current Assets                             $184,151           $143,331
       Property, Equipment and Other
        Assets                                     977,868            902,805
       Deferred Income Taxes                        16,337              8,920
          Total Assets                          $1,178,356         $1,055,056

       Liabilities and Stockholders'
        Equity
       Current Liabilities                        $198,235           $156,527
       Long-Term Debt                              270,000            270,000
       Deferred Income Taxes                       232,127            208,955
       Other Liabilities                            74,645             54,377
       Stockholders' Equity                        403,349            365,197
          Total Liabilities and
           Stockholders' Equity                 $1,178,356         $1,055,056


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

                                    Quarter Ended       Nine-Months Ended
                                    September 30,         September 30,
                                   2004      2003       2004       2003
    Cash Flows From Operating
     Activities
    Net Income                   $17,822   $22,668     $56,151     $1,349
    Cumulative Effect of
     Accounting Change                --        --          --      6,847
    Change in Derivative
     Fair Value                    7,023    (1,218)     13,295        (24)
    Impairment of Long-
     Lived Assets                  3,458     5,870       3,458     93,796
    Income Charges Not
     Requiring Cash               33,553    26,544      90,216     78,821
    Gain on Sale of Assets          (120)   (6,988)         (7)    (7,593)
    Deferred Income Taxes          8,268     3,072      15,449    (22,176)
    Changes in Assets and
     Liabilities                  (6,900)    1,955       4,676     11,633
    Exploration Expense            6,979    13,999      32,691     43,053
    Net Cash Provided
     by Operations                70,083    65,902     215,929    205,706

    Cash Flows From
     Investing Activities
    Capital Expenditures         (55,317)  (33,985)   (157,747)   (85,384)
    Proceeds from
     Sale of Assets                  164    15,821         186     18,181
    Restricted Cash                   --   (15,761)         --    (15,761)
    Exploration Expense           (6,979)  (13,999)    (32,691)   (43,053)
    Net Cash Used by
     Investing                   (62,132)  (47,924)   (190,252)  (126,017)

    Cash Flows From
     Financing Activities
    Sale of Common
     Stock Proceeds                  200     3,393      11,123      5,851
    Decrease in Debt                  --   (19,000)         --    (80,000)
    Purchase of
     Treasury Stock               (3,390)       --      (8,732)        --

    Dividends Paid                (1,304)   (1,287)     (3,906)    (3,755)
    Net Cash Used by
     Financing                    (4,494)  (16,894)     (1,515)   (77,904)

    Net Increase in Cash
     and Cash Equivalents         $3,457    $1,084     $24,162     $1,785

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,
                                   2004      2003       2004       2003
    As Reported - Net Income     $17,822   $22,668     $56,151     $1,349
    Reversal of Selected
     Items, Net of Tax:
       Impairment of Long-Lived
        Assets                     2,141     3,634       2,141     58,060
       Gain on Sale of Assets        (74)   (4,326)         (4)    (4,700)
       Change in Derivative Fair
        Value                      4,347      (754)      8,230        (15)
       Cumulative Effect of
        Accounting Change             --        --          --      6,847
    Net Income Including
     Reversal of Selected Items  $24,236   $21,222     $66,518    $61,541
    As Reported - Net Earnings
     Per Share                     $0.55     $0.70       $1.73      $0.04
    Per Share Impact of
     Reversing Selected Items       0.20     (0.04)       0.32       1.88
    Net Earnings Per Share
    Including Reversal
     of Selected Items             $0.75     $0.66       $2.05      $1.92
    Average Common Shares
     Outstanding                  32,548    32,179      32,491     32,000


              Discretionary Cash Flow Calculation and Reconciliation
                                  (In thousands)

                                   Quarter Ended       Nine-Months Ended
                                   September 30,         September 30,
                                   2004      2003       2004       2003
    Discretionary Cash Flow
    As Reported - Net Income     $17,822   $22,668     $56,151     $1,349
    Plus:
    Cumulative Effect of
     Accounting Change                --        --          --      6,847
    Change in Derivative
     Fair Value                    7,023    (1,218)     13,295        (24)
    Impairment of Long-
     Lived Assets                  3,458     5,870       3,458     93,796
    Income Charges Not Requiring
     Cash                         33,553    26,544      90,216     78,821
    Gain on Sale of Assets          (120)   (6,988)         (7)    (7,593)
    Deferred Income Taxes          8,268     3,072      15,449    (22,176)
    Exploration Expense            6,979    13,999      32,691     43,053
    Discretionary Cash Flow       76,983    63,947     211,253    194,073
    Plus: Changes in Assets and
     Liabilities                  (6,900)    1,955       4,676     11,633
    Net Cash Provided by
     Operations                  $70,083   $65,902    $215,929   $205,706


                 Impact of Mark-to-Market Accounting Requirements
                                  (In thousands)
                                   Quarter Ended       Nine-Months Ended
                                   September 30,         September 30,
                                   2004      2003       2004       2003
    Unrealized Gain (Loss) on
    Derivatives (1)
      Natural Gas                   $349      $676        $(69)     $(324)
      Crude Oil                   (7,372)      542     (13,225)       348

    Incentive Stock
     Compensation Expense (2)
      Performance Shares          (1,378)       --      (3,158)        --
    Mark-to-Market Impact,
    Before Income Tax            $(8,401)   $1,218    $(16,452)       $24
    Mark-to-Market Impact,
    Income Tax                     3,201      (464)      6,268         (9)
    Mark-to-Market Impact on
     Net Income                  $(5,200)     $754    $(10,184)       $15


      (1) These amounts represent the ineffective gain (loss) associated with
          the mark-to-market valuation of open positions. 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 September 30,
          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 Corporation
    -0-                             10/28/2004
    /CONTACT:  Scott Schroeder of Cabot Oil & Gas Corporation,
+1-281-589-4993/
    (COG)

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

ER-AC 
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4480 10/28/2004 19:07 EDT http://www.prnewswire.com