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Cabot Oil & Gas Corporation Establishes New Records

Posted on: Thursday, 16 February 2006, 21:00 CST

HOUSTON, Feb. 16 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation today released year-end financial results including net income of $148.4 million, or $3.04 per share, cash flow from operations of $364.6 million and discretionary cash flow of $374.4 million. All of these figures were significantly above the levels recorded for 2004, the previous benchmark for financial success in the Company. The comparison levels for 2004 include $88.4 million, or $1.81 per share, for net income (all 2004 per share data has been adjusted for the 3-for-2 stock split in March 2005), $273.0 million for cash flow from operations and discretionary cash flow of $294.3 million.

"It is no secret that commodity prices were the key drivers for Cabot and many of its peers reporting such robust results," stated Dan O. Dinges, Chairman, President and Chief Executive Officer. "Even with a portion of the upside hedged away, the cash generated provided funding for Cabot's largest ever organic capital program."

For the full year, natural gas price realizations were $6.74 per Mcf, compared to $5.20 per Mcf in 2004. The Company also experienced an increase in oil prices, recording $44.19 per barrel in 2005 versus $31.55 per barrel in 2004. "Expense inflation occurs as the industry reacts to higher prices by increasing its activity levels and its demand for services," commented Dinges. "In 2005, our expenses increased over 2004, with the largest percent increases coming from exploration expense, stock compensation, and other taxes."

For the year, Cabot reported 84.4 Bcfe of production, down less than one percent versus 2004's 84.8 Bcfe. "Deferred volumes the last four months of the year from hurricanes Katrina and Rita are estimated at 1.4 Bcfe," said Dinges. "This highlights how close we are in transitioning to and establishing a growing production profile from an organic program." Dinges added, "Reinforcing this point are two important facts: (1) we continue to grow our natural gas production, and (2) our equivalent fourth quarter 2005 production volumes increased versus the comparable quarter in 2004."

Fourth Quarter

The Company set a new quarterly high in the fourth quarter of 2005, reporting net income of $58.5 million, or $1.20 per share, compared to $32.2 million, or $.66 per share, in 2004. Quarterly cash flow comparisons were just as robust, with cash flow from operations of $117.4 million, more than doubling last year's figure of $57.1 million, and discretionary cash flow of $119.3 million, up 44 percent. Higher realized prices and production more than offset the increase in expense levels.

Selected Items

The selected items that impacted the quarter and full year earnings figures, but had no impact on cash flow related items, included a gain on sale of assets, an unrealized change in derivative fair value, and an impairment of oil and gas properties in the 2004 full year period. Taking these into account the net income comparison for 2005 versus 2004 is $144.3 million, or $2.95 per share, versus $91.8 million, or $1.88 per share. The quarter comparison for net income is $53.1 million, or $1.09 per share, and $25.3 million, or $.52 per share.

Balance Sheet

Long-term debt increased over last year as the Company used its credit facility to fund about $70 million in acquisitions. During the course of the year, but predominately in the fourth quarter, the Company repurchased 452,300 shares of its common stock at a weighted average purchase price of $42.41. "With the inherent value in Cabot's capital program, we recommenced buying shares in late November and early December with the market pull back," stated Dinges. "We still see a lot of merit and long-term value for the shareholders in looking at COG stock as an investment alternative."

Reserves

Cabot increased reserves by 10.7% in 2005, bringing year-end total proved reserves to 1,330.9 Bcfe -- the highest level ever for the Company. To accomplish this, Cabot grew reserves in each of its operating regions and replaced 252% of 2005 production. The Company's 2005 drilling program added 187.9 Bcfe, a limited acquisition program added 20.1 Bcfe, and the Company had a 4.9 Bcfe positive revision. The all-in finding cost was $1.91 per Mcfe.

"With the high demand for materials and services in our industry and the resulting inflationary pressure we have experienced during the year, I am very pleased with our overall reserve and finding cost for 2005," said Dinges. "I am particularly happy with the drilling only finding cost of $1.77 per Mcfe, while replacing 223% of production. I should add that these figures reflect a proven, undeveloped (PUD) component consistent with historical levels."

Outlook

For 2006, Cabot once again is expanding its drilling program. "We have secured the rigs necessary to complete our program, a program that focuses on more development activity and less risk," said Dinges. "The current forecasted activity level calls for 391 wells, with increased activity in each region including expanded drilling on each of the acquisition plays purchased in 2005."

Given the current outlook on prices and the hedge philosophy for 2006 of wide range collars, Cabot is well positioned to participate more fully in any up market for 2006 commodity prices. On a weighted average basis, Cabot's natural gas collars range from $8.25 to $12.74 per Mcf while its oil collar ranges from $50.00 to $76.00 per barrel. These derivatives cover 34% of anticipated 2006 equivalent production.

Conference Call

Listen in live to Cabot Oil & Gas Corporation's 2005 year-end/fourth quarter financial and operating results discussion with financial analysts on Friday, February 17, 2006 at 9:30 AM EST (8:30 AM CST) at http://www.cabotog.com/. A teleconference replay will also be available at (800) 642-1687, (U.S./Canada) or (706) 645-9291 (International), passcode: 4293569. A replay will be available from Friday, February 17 through Friday, February 24, 2006. 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 http://www.cabotog.com/.

Cabot Oil & Gas Corporation, headquartered in Houston, Texas is a leading North American exploration and production independent. The Company's reserves are focused in both conventional and unconventional basins including the East, the West (Rocky Mountain and Mid-Continent), the Gulf Coast (South and East Texas to North Louisiana) and 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 Twleve Months Ended December 31, December 31, 2005 2004 2005 2004 PRODUCED NATURAL GAS (Bcf) & OIL (MBbl) Natural Gas Gulf Coast 7.1 7.7 28.1 31.3 West 5.9 5.6 23.2 21.9 East 5.7 5.1 21.4 19.4 Canada 0.4 0.2 1.2 0.2 Total 19.1 18.6 73.9 72.8 Crude/Condensate/Ngl Gulf Coast 339 411 1,530 1,809 West 45 40 172 163 East 7 7 27 27 Canada 4 2 18 3 Total 395 460 1,747 2,002 Equivalent Production (Bcfe) 21.5 21.3 84.4 84.8 PRICES Average Produced Gas Sales Price ($/Mcf) Gulf Coast $6.73 $5.55 $6.38 $5.27 West $7.82 $4.83 $6.00 $4.75 East $11.06 $6.13 $8.02 $5.60 Canada $8.89 $4.69 $6.79 $4.69 Total(1) $8.42 $5.49 $6.74 $5.20 Crude/Condensate Price ($/Bbl) Gulf Coast $43.13 $30.52 $42.81 $30.67 West $58.70 $47.18 $55.37 $40.29 East $56.36 $44.95 $53.84 $38.28 Canada $47.08 $37.93 $43.39 $37.93 Total(1) $45.09 $32.18 $44.19 $31.55 WELLS DRILLED Gross 87 51 316 256 Net 70 41 247 220 Gross Success Rate 94% 90% 95% 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 Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Operating Revenues Natural Gas Production (1) $161,611 $103,143 $499,177 $379,661 Brokered Natural Gas 37,837 24,005 98,605 84,416 Crude Oil and Condensate (1) 25,098 25,189 82,348 60,022 Other 536 2,302 2,667 6,309 225,082 154,639 682,797 530,408 Operating Expenses Brokered Natural Gas Cost 33,634 21,273 87,183 75,217 Direct Operations - Field and Pipeline 18,579 15,092 61,750 53,581 Exploration 14,444 15,439 61,840 48,130 Depreciation, Depletion and Amortization 30,932 28,538 121,424 113,488 Impairment of Oil & Gas Properties -- -- -- 3,458 General and Administrative (excluding Stock-Based Compensation) 7,518 8,512 28,028 28,198 Stock-Based Compensation (2) 2,793 924 9,622 6,537 Taxes Other Than Income 17,240 10,884 54,293 41,022 125,140 100,662 424,140 369,631 (Loss) / Gain on Sale of Assets -- (131) 74 (124) Income from Operations 99,942 53,846 258,731 160,653 Interest Expense and Other 7,036 5,630 22,497 22,029 Income Before Income Taxes 92,906 48,216 236,234 138,624 Income Tax Expense 34,401 15,989 87,789 50,246 Net Income $58,505 $32,227 $148,445 $88,378 Net Earnings Per Share - Basic (3) $1.20 $0.66 $3.04 $1.81 Weighted Average Common Shares Outstanding (3) 48,831 48,722 48,856 48,733 (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) December 31, December 31, 2005 2004 Assets Current Assets $230,312 $194,679 Property, Equipment and Other Assets 1,245,471 1,001,422 Deferred Income Taxes 19,587 14,855 Total Assets $1,495,370 $1,210,956 Liabilities and Stockholders' Equity Current Liabilities $218,584 $196,889 Long-Term Debt 320,000 250,000 Deferred Income Taxes 289,381 247,376 Other Liabilities 67,194 61,029 Stockholders' Equity 600,211 455,662 Total Liabilities and Stockholders' Equity $1,495,370 $1,210,956 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In thousands) Quarter Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Cash Flows From Operating Activities Net Income $58,505 $32,227 $148,445 $88,378 Unrealized Change in Derivative Fair Value (8,677) (11,292) (6,626) 2,003 Impairment of Oil & Gas Properties -- -- -- 3,458 Income Charges Not Requiring Cash 33,581 29,234 131,227 119,448 Loss / (Gain) on Sale of Assets -- 131 (74) 124 Deferred Income Tax Expense 21,403 17,264 39,628 32,713 Changes in Assets and Liabilities (1,807) (25,908) (9,880) (21,232) Exploration Expense 14,444 15,439 61,840 48,130 Net Cash Provided by Operations 117,449 57,095 364,560 273,022 Cash Flows From Investing Activities Capital Expenditures (109,802) (49,599) (351,306) (207,346) Proceeds from Sale of Assets -- (67) 996 119 Exploration Expense (14,444) (15,439) (61,840) (48,130) Net Cash Used by Investing (124,246) (65,105) (412,150) (255,357) Cash Flows From Financing Activities Sale of Common Stock Proceeds 498 1,351 4,586 12,474 Net Increase in Debt 60,000 -- 70,000 -- Decrease in Book Overdrafts (25,691) -- -- -- Purchase of Treasury Stock (18,612) (6,899) (19,183) (15,631) Dividends Paid (1,959) (1,300) (7,213) (5,206) Net Cash Provided / (Used) by Financing 14,236 (6,848) 48,190 (8,363) Net Increase / (Decrease) in Cash and Cash Equivalents $7,439 $(14,858) $600 $9,302 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, 2005 2004 2005 2004 As Reported - Net Income $58,505 $32,227 $148,445 $88,378 Reversal of Selected Items, Net of Tax: Impairment of Oil & Gas Properties -- -- -- 2,139 Loss / (Gain) on Sale of Assets -- 81 (46) 77 Unrealized Change in Derivative Fair Value (5,374) (6,985) (4,108) 1,239 Net Income Including Reversal of Selected Items $53,131 $25,323 $144,291 $91,833 As Reported - Net Earnings Per Share $1.20 $0.66 $3.04 $1.81 Per Share Impact of Reversing Selected Items (0.11) (0.14) (0.09) 0.07 Net Earnings Per Share Including Reversal of Selected Items $1.09 $0.52 $2.95 $1.88 Weighted Average Common Shares Outstanding 48,831 48,722 48,856 48,733 Discretionary Cash Flow Calculation and Reconciliation (In thousands) Quarter Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Discretionary Cash Flow As Reported - Net Income $58,505 $32,227 $148,445 $88,378 Plus: Unrealized Change in Derivative Fair Value (8,677) (11,292) (6,626) 2,003 Impairment of Oil & Gas Properties -- -- -- 3,458 Income Charges Not Requiring Cash 33,581 29,234 131,227 119,448 Loss / (Gain) on Sale of Assets -- 131 (74) 124 Deferred Income Tax Expense 21,403 17,264 39,628 32,713 Exploration Expense 14,444 15,439 61,840 48,130 Discretionary Cash Flow 119,256 83,003 374,440 294,254 Plus: Changes in Assets and Liabilities (1,807) (25,908) (9,880) (21,232) Net Cash Provided by Operations $117,449 $57,095 $364,560 $273,022 Net Debt Reconciliation (In thousands) December 31, December 31, 2005 2004 Current Portion of Long-Term Debt $20,000 $20,000 Long-Term Debt 320,000 250,000 Total Debt $340,000 $270,000 Stockholders' Equity 600,211 455,662 Total Capitalization $940,211 $725,662 Total Debt $340,000 $270,000 Less: Cash and Cash Equivalents (10,626) (10,026) Net Debt $329,374 $259,974 Net Debt $329,374 $259,974 Stockholders' Equity 600,211 455,662 Total Adjusted Capitalization $929,585 $715,636 Total Debt to Total Capitalization Ratio 36.2% 37.2% Less: Impact of Cash and Cash Equivalents 0.8% 0.9% Net Debt to Adjusted Capitalization Ratio 35.4% 36.3% Impact of Mark-to-Market Accounting Requirements (In thousands) Quarter Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Unrealized Gain / (Loss) on Derivatives (1) Natural Gas $1,300 $983 $1,114 $914 Crude Oil 7,377 10,309 5,512 (2,917) Incentive Stock Compensation Expense (2) Performance Shares (785) (26) (3,357) (3,184) Mark-to-Market Impact, Before Income Tax $7,892 $11,266 $3,269 $(5,187) Mark-to-Market Impact, Income Tax (2,999) (4,297) (1,242) 1,978 Mark-to-Market Impact on Net Income $4,893 $6,969 $2,027 $(3,209) (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 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 or subtracting the 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, 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, +1-281-589-4993, for Cabot Oil & GasCorporation

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

Source: PRNewswire-FirstCall

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