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Cabot Oil & Gas Reports Record Second Quarter Financial Results

Posted on: Thursday, 28 July 2005, 18:01 CDT

HOUSTON, July 28 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation today announced record second quarter earnings and discretionary cash flow. Net income for the quarter rose 83 percent to $35.4 million, or $0.72 per share, versus $19.3 million, or $0.40 per share for the same period last year. In terms of cash flow, the Company reported cash flow from operations of $80.1 million compared to $45.7 million in last year's second quarter. Discretionary cash flow rose 32 percent to $79.6 million for the quarter. Before giving effect to the non-cash selected items related to the comparable second quarters, Cabot would have reported $33.0 million of net income, or $0.67 per share versus $19.8 million or $0.41 per share last year, still record performance levels (see Selected Items table for details). All information has been adjusted for the first quarter 2005 3-for-2 stock split.

The record financial results are attributable to higher realized commodity prices and improved production for the year-over-year quarterly comparison, the consecutive quarter periods and for the comparative year-to-date periods. Natural gas price realizations reached $6.02 per mcf for the 2005 second quarter, a 20 percent increase over last year's comparable period. Realized oil price quarterly comparisons were $43.76 per barrel for 2005 versus $31.10 per barrel for 2004. Production improvements were driven by results from the West region, where the Company experienced a nine percent increase between comparable quarters. Advances were also made in the East region with a five percent increase in equivalent production and to a lesser extent new production from Canada. This was offset by a four percent decline in the Gulf Coast region equivalent production.

"Cabot's financial metrics continue to improve as do the underlying operational prospects," stated Dan O. Dinges, Chairman, President and Chief Executive Officer. "We anticipate year-over-year production and reserve growth in 2005; the magnitude of any increases, however, will be impacted by timely execution of projects due to the up-tick of business in the service sector."

In regards to costs, the Company experienced upward pressure in several expense categories in the second quarter, the leader being "Taxes Other Than Income," which is substantially price driven, followed by higher DD&A, which is a function of the higher cost in the areas in which Cabot does business. Dinges added, "We continue to work hard to manage the cost creep (including goods and services, along with personnel costs) in our industry and its overall impact on our operating results."

Year-to-Date

For the first six months of 2005, Cabot Oil & Gas reported a new high for net income, cash flow from operations and discretionary cash flow. Reported numbers included: $56.2 million or $1.15 per share, for net income; $188.1 million for cash flow from operations; and $162.3 million for discretionary cash flow. Higher realized commodity prices and higher production drove the improvement.

At June 30, 2005, Cabot had long-term debt of $250 million and a positive working capital position of $14.7 million (which includes $51.9 million of cash and cash equivalents, and $20 million related to the current portion of long-term debt and $42.1 million of mark-to-market liability associated with unrealized derivative losses).

"With the inflationary pressure in drilling costs, accretive opportunities and our strong financial position, we have increased our capital program to $330 million from the original $280 million level," said Dinges. "This figure includes the increment required for the acquisitions disclosed in the Operations Update press release."

Late in the second quarter and early in the third quarter, the Company executed two hedges covering 2006 production. Both hedges were wide collars, one covering oil production and one covering natural gas production. The oil hedge consists of 1,000 barrels per day with a $50.00 floor and a $76.00 ceiling for all of 2006. The natural gas hedge is for 25,000 Mmbtu per day, with a floor of $7.00 per Mmbtu and a ceiling of $11.00 per Mmbtu. "These volumes represent only a small portion of the full year anticipated production total," added Dinges.

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2005 second quarter financial and operating results discussion with financial analysts on Friday, July 29, at 9:30 am EDT (8:30am CDT) at http://www.cabotog.com/. A teleconference replay will also be available at (800) 642-1687, (U.S./Canada) or (706) 645-9291 (International), pass code 8037259. A replay will be available from Friday, July 29 through Friday, August 5, 2005. 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 http://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, including the Rocky Mountains and Mid-Continent; the East, with an expansion effort in Canada. For additional information, visit the Company's Internet homepage at http://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, 2005 2004 2005 2004 PRODUCED NATURAL GAS (Bcf) & OIL (MBbl) Natural Gas Gulf Coast 7.3 7.6 14.7 15.2 West 5.7 5.2 11.4 10.8 East 5.1 4.9 10.2 9.3 Canada 0.3 --- 0.5 --- Total 18.4 17.7 36.8 35.3 Crude/Condensate/Ngl Gulf Coast 421 455 827 948 West 45 43 82 84 East 8 7 13 13 Canada 5 0 9 --- Total 479 505 931 1,045 Equivalent Production (Bcfe) 21.3 20.7 42.4 41.6 PRICES Average Produced Gas Sales Price ($/Mcf) Gulf Coast $6.14 $5.12 $6.09 $5.13 West $5.47 $4.64 $5.10 $4.74 East $6.54 $5.29 $6.44 $5.53 Canada $4.53 $ --- $4.95 $ --- Total $6.02 $5.02 $5.86 $5.12 Crude/Condensate Price ($/Bbl) Gulf Coast $42.86 $30.43 $42.19 $30.57 West $52.27 $37.37 $50.61 $35.89 East $50.32 $36.41 $49.37 $34.17 Canada $35.43 $ --- $36.83 $ --- Total $43.76 $31.10 $42.96 $31.04 WELLS DRILLED Gross 97 92 141 130 Net 77 84 105 113 Gross Success Rate 98% 97% 94% 98% CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (In thousands, except per share amounts) Quarter Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Operating Revenues Natural Gas Production (1) $111,817 $90,028 $216,089 $180,407 Brokered Natural Gas 15,520 15,628 42,012 47,187 Crude Oil and Condensate (1) 23,936 13,552 35,914 26,319 Other 611 534 1,943 2,433 151,884 119,742 295,958 256,346 Operating Expenses Brokered Natural Gas Cost 13,701 13,596 36,999 42,317 Direct Operations - Field and Pipeline 14,307 13,114 28,925 25,192 Exploration 11,362 9,568 30,731 25,712 Depreciation, Depletion and Amortization 29,755 27,350 59,822 54,162 General and Administrative (excluding Stock-based Compensation) 7,168 6,935 15,093 13,180 Stock-based Compensation (2) 1,532 2,647 2,567 3,118 Taxes Other Than Income 12,396 9,921 22,114 20,023 90,221 83,131 196,251 183,704 Gain / (Loss) on Sale of Assets 59 (172) 59 (113) Income from Operations 61,722 36,439 99,766 72,529 Interest Expense and Other 5,134 5,445 10,122 10,822 Income Before Income Taxes 56,588 30,994 89,644 61,707 Income Tax Expense 21,166 11,676 33,460 23,378 Net Income $35,422 $19,318 $56,184 $38,329 Net Earnings Per Share - Basic (3) $0.72 $0.40 $1.15 $0.79 Average Common Shares Outstanding (3) 48,917 48,789 48,821 48,693 (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) Reflects the 3-for-2 split of the Company's Common Stock on March 31, 2005. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands) June 30, December 31, 2005 2004 Assets Current Assets $207,400 $194,679 Property, Equipment and Other Assets 1,058,338 1,001,422 Deferred Income Taxes 14,680 14,855 Total Assets $1,280,418 $1,210,956 Liabilities and Stockholders' Equity Current Liabilities $192,732 $196,889 Long-Term Debt 250,000 250,000 Deferred Income Taxes 259,701 247,376 Other Liabilities 62,165 61,029 Stockholders' Equity 515,820 455,662 Total Liabilities and Stockholders' Equity $1,280,418 $1,210,956 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In thousands) Quarter Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Cash Flows From Operating Activities Net Income $35,422 $19,318 $56,184 $38,329 Change in Derivative Fair Value (3,831) 653 3,681 6,272 Income Charges Not Requiring Cash 30,679 27,808 62,669 54,883 (Gain) / Loss on Sale of Assets (59) 172 (59) 113 Deferred Income Tax Expense 6,056 2,632 9,078 7,181 Changes in Assets and Liabilities 430 (14,420) 25,792 10,811 Exploration Expense 11,362 9,568 30,731 25,712 Net Cash Provided by Operations 80,059 45,731 188,076 143,301 Cash Flows From Investing Activities Capital Expenditures (74,778) (66,719) (115,848) (102,430) Proceeds from Sale of Assets 122 22 710 22 Exploration Expense (11,362) (9,568) (30,731) (25,712) Net Cash Used by Investing (86,018) (76,265) (145,869) (128,120) Cash Flows From Financing Activities Sale of Common Stock Proceeds 849 6,812 3,580 13,468 Purchase of Treasury Stock -- (5,342) (571) (5,342) Dividends Paid (1,957) (1,306) (3,296) (2,602) Net Cash Provided / (Used) by Financing (1,108) 164 (287) 5,524 Net Increase / (Decrease) in Cash and Cash Equivalents $(7,067) $(30,370) $41,920 $20,705 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, 2005 2004 2005 2004 As Reported - Net Income $35,422 $19,318 $56,184 $38,329 Reversal of Selected Items, Net of Tax: (Gain) / Loss on Sale of Assets (36) 107 (36) 70 Change in Derivative Fair Value (2,370) 404 2,277 3,882 Net Income Including Reversal of Selected Items $33,016 $19,829 $58,425 $42,281 As Reported - Net Earnings Per Share $0.72 $0.40 $1.15 $0.79 Per Share Impact of Reversing Selected Items (0.05) 0.01 0.05 0.08 Net Earnings Per Share Including Reversal of Selected Items $0.67 $0.41 $1.20 $0.87 Average Common Shares Outstanding 48,917 48,789 48,821 48,693 Discretionary Cash Flow Calculation and Reconciliation (In thousands) Quarter Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Discretionary Cash Flow As Reported - Net Income $35,422 $19,318 $56,184 $38,329 Plus: Change in Derivative Fair Value (3,831) 653 3,681 6,272 Income Charges Not Requiring Cash 30,679 27,808 62,669 54,883 (Gain) / Loss on Sale of Assets (59) 172 (59) 113 Deferred Income Tax Expense 6,056 2,632 9,078 7,181 Exploration Expense 11,362 9,568 30,731 25,712 Discretionary Cash Flow 79,629 60,151 162,284 132,490 Plus: Changes in Assets and Liabilities 430 (14,420) 25,792 10,811 Net Cash Provided by Operations $80,059 $45,731 $188,076 $143,301 Net Debt Reconciliation (In thousands) June 30, December 31, 2005 2004 Current Portion of Long-Term Debt $20,000 $20,000 Long-Term Debt 250,000 250,000 Total Debt $270,000 $270,000 Stockholders' Equity 515,820 455,662 Total Capital $785,820 $725,662 Total Debt $270,000 $270,000 Less: Cash and Cash Equivalents (51,946) (10,026) Net Debt $218,054 $259,974 Net Debt $218,054 $259,974 Stockholders' Equity 515,820 455,662 Total Adjusted Capital $733,874 $715,636 Total Debt to Total Capital Ratio 34.4% 37.2% Less: Impact of Cash and Cash Equivalents 4.7% 0.9% Net Debt to Capitalization Ratio 29.7% 36.3% Impact of Mark-to-Market Accounting Requirements (In thousands) Quarter Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Unrealized Gain / (Loss) on Derivatives (1) Natural Gas $782 $1,306 $222 $(418) Crude Oil 3,049 (1,959) (3,903) (5,854) Incentive Stock Compensation Expense (2) Performance Shares 298 (1,781) (114) (1,781) Mark-to-Market Impact, Before Income Tax $4,129 $(2,434) $(3,795) $(8,053) Mark-to-Market Impact, Income Tax (1,575) 927 1,447 3,068 Mark-to-Market Impact on Net Income $2,554 $(1,507) $(2,348) $(4,985) (1) These amounts represent the unrealized loss associated with the mark-to-market valuation of open positions which do not qualify for hedge accounting or are 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 the loss 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 June 30, 2005 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, 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.

Cabot Oil & Gas Corporation

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

Web site: http://www.cabotog.com/

Source: PRNewswire-FirstCall

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