Cabot Oil & Gas Corporation (NYSE:COG) reported financial and operating results for the fourth quarter and full-year ended December 31, 2015.
“Despite a significant year-over-year reduction in capital spending, Cabot generated double-digit reserve and production growth for the sixth consecutive year while continuing to improve its industry-leading cost structure,” said Dan O. Dinges, Chairman, President and Chief Executive Officer. “Finding costs and operating costs decreased 20 percent and 7 percent per unit, respectively, highlighting our capital efficient, low-cost asset base. As we previously highlighted in our 2016 budget announcement, we remain committed to our strategy of disciplined capital allocation with a focus on maintaining a strong balance sheet. We believe our low-cost structure, high-quality assets and capital discipline will allow us to successfully navigate through this challenged market environment.”
Full-Year 2015 Financial Results
Equivalent production was 602.5 billion cubic feet equivalent (Bcfe) in 2015, consisting of 566.0 billion cubic feet (Bcf) of natural gas, 5.4 million barrels (Mmbbls) of crude oil and condensate, and 667,000 barrels (Bbls) of natural gas liquids (NGLs). These figures represent increases of 13 percent, 11 percent, 51 percent, and 79 percent, respectively, compared to 2014.
Cash flow from operations was $740.7 million in 2015, compared to $1.2 billion in 2014. Discretionary cash flow in 2015 was $699.1 million, compared to $1.3 billion in 2014. Net loss in 2015 was $113.9 million, or $0.28 per share, compared to net income of $104.5 million, or $0.25 per share, in 2014. Excluding the effect of selected items (detailed in the table below), net income was $55.4 million, or $0.13 per share, in 2015, compared to net income of $404.6 million, or $0.97 per share, in 2014. EBITDAX in 2015 was $815.2 million, compared to $1.4 billion in 2014. Significant reductions in realized prices for both natural gas and oil were the primary drivers for the lower results during the year, partially offset by higher equivalent production and lower overall expenses. See the supplemental tables at the end of this press release for a reconciliation of non-GAAP measures including discretionary cash flow, net income excluding selected items, EBITDAX and net debt to adjusted capitalization ratio.
Natural gas price realizations, including the impact of derivatives, were $2.15 per thousand cubic feet (Mcf) in 2015, down 34 percent compared to 2014. Excluding the impact of derivatives, natural gas price realizations for 2015 were $1.81 per Mcf, representing an $0.85 discount to NYMEX settlement prices. Oil price realizations were $45.72 per Bbl, down 48 percent compared to 2014. NGL price realizations were $12.56 per Bbl, down 61 percent compared to 2014.
Operating expenses (including financing) decreased to $2.37 per thousand cubic feet equivalent (Mcfe) in 2015, an improvement of 7 percent from $2.56 per Mcfe in 2014.
Cabot drilled or participated in a total of 133 net wells during 2015 and incurred a total of $773.5 million in capital expenditures associated with activity during this period.
Fourth Quarter 2015 Financial Results
Equivalent production in the fourth quarter of 2015 was 151.0 Bcfe, consisting of 142.8 Bcf of natural gas, 1.2 Mmbbls of crude oil and condensate, and 175,000 Bbls of NGLs. Equivalent production was roughly flat with fourth quarter 2014 volumes due to curtailments in the Marcellus Shale and lower operating activity levels company-wide.
Cash flow from operations in the fourth quarter of 2015 was $155.8 million, compared to $293.2 million in the fourth quarter of 2014. Discretionary cash flow in the fourth quarter of 2015 was $125.3 million, compared to $324.2 million in the fourth quarter of 2014. Net loss in the fourth quarter of 2015 was $111.1 million, or $0.27 per share, compared to a net loss of $221.8 million, or $0.54 per share, in the fourth quarter of 2014. Excluding the effect of selected items (detailed in the table below), net loss was $6.4 million, or $0.02 per share, compared to net income of $95.3 million, or $0.23 per share, for the fourth quarter of 2014. EBITDAX for the fourth quarter of 2015 was $164.2 million, compared to $356.7 million for the fourth quarter of 2014.
Natural gas price realizations, including the impact of derivatives, were $1.94 per Mcf in the fourth quarter of 2015, down 34 percent compared to the fourth quarter of 2014. Excluding the impact of derivatives, natural gas price realizations for the quarter were $1.52 per Mcf, representing a $0.75 discount to NYMEX settlement prices. Oil price realizations were $37.74 per Bbl, down 48 percent compared to the fourth quarter of 2014. NGL price realizations were $11.69 per Bbl, down 56 percent compared to the fourth quarter of 2014.
Operating expenses (including financing) decreased to $2.30 per Mcfe in the fourth quarter of 2015, a 7 percent improvement compared to $2.47 per Mcfe in the fourth quarter of 2014.
Cabot drilled or participated in a total of 27 net wells during the fourth quarter of 2015 and incurred a total of $96.7 million in capital expenditures associated with activity during this period.
Year-End 2015 Financial Position and Liquidity
As of December 31, 2015, the Company’s net debt to adjusted capitalization ratio was 50.2 percent, compared to 44.7 percent at December 31, 2014. The Company’s total debt was $2.0 billion, of which $413 million was outstanding under the Company’s $1.8 billion credit facility.
Year-End 2015 Proved Reserves
The Company reported year-end proved reserves of 8.2 trillion cubic feet equivalent (Tcfe), an increase of 11 percent over year-end 2014. Specific highlights from the Company’s year-end reserve report include:
- Total company all-sources finding and development costs of $0.57 per Mcfe
- Marcellus-only all-sources finding and development costs of $0.31 per Mcf
- Total company all-sources reserve replacement of 231 percent
- Marcellus-only all-sources reserve replacement of 278 percent
“Despite a significant year-over-year reduction in both capital spending and the commodity prices used in calculating year-end reserves, Cabot generated double-digit reserve growth for the sixth consecutive year, which we believe will stand out among our peers during this down cycle in the industry,” commented Dinges.
The table below reconciles the components driving the 2015 reserve increase:
|Proved Reserves Reconciliation (in Bcfe)|
|Balance at December 31, 2014||7,401|
|Revisions of prior estimates||426|
|Extensions, discoveries and other additions||966|
|Balance at December 31, 2015||8,190|
As of December 31, 2015, 96 percent of Cabot’s year-end proved reserves were natural gas and 92 percent were located in the Marcellus Shale. Approximately 59 percent of the year-end proved reserves were classified as proved developed (PD) and 41 percent were classified as proved undeveloped (PUD), of which 11 percent were drilled uncompleted PUDs and 30 percent were undrilled PUDs.
Marcellus Shale Inventory and Estimated Ultimate Recovery (EUR) Update
As a result of the Company’s successful downspacing tests throughout its Marcellus Shale position, the Company has reduced its spacing between laterals from 1,000 feet to between 700 and 800 feet. The resulting impact is an increase in its Marcellus location count from approximately 3,000 locations to approximately 3,450 locations. The production history for the downspaced wells implies no reduction in EURs relative to the 1,000-foot spaced wells.
Additionally, based on the Company’s year-end reserve bookings for 250 producing Lower Marcellus wells that have been completed at the current well design utilizing 200-foot stage spacing, Cabot has increased its guidance for Lower Marcellus EUR per 1,000 lateral feet from 3.6 Bcf to 3.8 Bcf. “Cabot’s wells in Northeast Pennsylvania continue to set the bar for well performance as highlighted by this increase in estimated recoveries per foot,” stated Dinges. “Based on state reported data, the Company has 18 of the top 20 wells drilled in the state of Pennsylvania since 2012 as measured by cumulative production despite recent curtailments throughout the field.” (Original Source)
Shares of Cabot Oil & Gas Corp closed yesterday at $19.55, down $0.94 or 4.59%. COG has a 1-year high of $35.64 and a 1-year low of $14.88. The stock’s 50-day moving average is $18.62 and its 200-day moving average is $20.91.
On the ratings front, Cabot Oil & Gas has been the subject of a number of recent research reports. In a report released yesterday, Drexel Hamilton analyst Robert Christensen initiated coverage with a Buy rating on COG and a price target of $25, which represents a potential upside of 27.9% from where the stock is currently trading. Separately, on January 28, Barclays’ Jeffrey Robertson maintained a Hold rating on the stock and has a price target of $18.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Robert Christensen and Jeffrey Robertson have a total average return of -28.6% and 1.3% respectively. Christensen has a success rate of 20.5% and is ranked #3587 out of 3640 analysts, while Robertson has a success rate of 42.8% and is ranked #1105.
The street is mostly Neutral on COG stock. Out of 7 analysts who cover the stock, 4 suggest a Hold rating and 3 recommend to Buy the stock. The 12-month average price target assigned to the stock is $18.00, which implies a downside of 7.9% from current levels.
Cabot Oil & Gas Corp is an independent oil and gas company engaged in the development and exploration of oil and gas properties located in North America.