Cabot Oil & Gas Corporation (NYSE:COG) reported financial and operating results for the first quarter of 2016.
“Cabot’s results for the quarter highlight our commitment to financial discipline, which was evident by our ability to fully fund our investing activities with operating cash flow and proceeds from a non-core divestiture,” said Dan O. Dinges, Chairman, President and Chief Executive Officer. “Our positive results for the quarter were due in large part to continued enhancements to our industry-leading cost structure and improvements in our natural gas price differentials, which exceeded our expectations for the quarter. Based on our current outlook for the remainder of the year, we are well-positioned to deliver production growth while spending within our operating cash flow, which differentiates Cabot in this challenged market environment.”
First Quarter 2016 Financial Results
Equivalent production in the first quarter of 2016 was 160.3 billion cubic feet equivalent (Bcfe), consisting of 153.1 billion cubic feet (Bcf) of natural gas, 1.1 million barrels (Mmbbls) of crude oil and condensate, and 92,000 barrels (Bbls) of natural gas liquids (NGLs).
Cash flow from operations in the first quarter of 2016 was $62.1 million, compared to $267.4 million in the first quarter of 2015. Discretionary cash flow in the first quarter of 2016 was $71.2 million, compared to $240.2 million in the first quarter of 2015. Net loss in the first quarter of 2016 was $51.2 million, or $0.12 per share, compared to net income of $40.3 million, or $0.10 per share, in the first quarter of 2015. Excluding the effect of selected items (detailed in the table below), net loss in the first quarter of 2016 was $55.4 million, or $0.13 per share, compared to net income of $49.2 million, or $0.12 per share, in the first quarter of 2015. EBITDAX in the first quarter of 2016 was $100.9 million, compared to $279.4 million in the first quarter of 2015. 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 were $1.49 per thousand cubic feet (Mcf) in the first quarter of 2016, down 39 percent compared to the first quarter of 2015. Natural gas price realizations for the quarter implied a $0.60 discount to NYMEX settlement prices compared to a $0.75 discount to NYMEX settlement prices in the first quarter of 2015 (excluding the impact of hedges). Oil price realizations were $27.65 per Bbl, down 37 percent compared to the first quarter of 2015. NGL price realizations were $7.22 per Bbl, down 35 percent compared to the first quarter of 2015.
Operating expenses (including financing) decreased to $2.26 per thousand cubic feet equivalent (Mcfe) in the first quarter of 2016, a 3 percent improvement compared to $2.33 per Mcfe in the first quarter of 2015. Cash operating expenses (excluding depreciation, depletion and amortization; stock-based compensation; exploratory dry hole cost; and amortization of debt issuance costs) decreased to $1.18 per Mcfe in the first quarter of 2016, a 6 percent improvement compared to $1.26 per Mcfe in the first quarter of 2015.
Cabot drilled 10 net wells and completed 21 net wells during the first quarter of 2016, incurring a total of $91.7 million in capital expenditures associated with activity during this period.
During the first quarter of 2016, the Company averaged 1,628 million cubic feet (Mmcf) per day of net Marcellus production (1,913 gross operated Mmcf per day), an increase of 10 percent sequentially compared to the fourth quarter of 2015. During the first quarter, the Company drilled 7 net wells, completed 12 net wells and placed 8 net wells on production.
Cabot is currently operating 1 rig in the Marcellus Shale and plans to remain at this level for the remainder of the year.
Eagle Ford Shale
Cabot’s net production in the Eagle Ford Shale during the first quarter of 2016 was 12,975 barrels of oil equivalent (Boe) per day, a decrease of 13 percent sequentially compared to the fourth quarter of 2015. Net oil production during the quarter was 11,908 Bbls per day, a decrease of 6 percent sequentially compared to the fourth quarter of 2015. In addition to natural production declines resulting from reduced operating activity, the primary driver of the lower sequential equivalent production was unscheduled downtime at a third-party processing plant which impacted natural gas and NGL volumes for a significant portion of the quarter. During the first quarter, the Company drilled 3 net wells and completed and placed on production 9 net wells, the majority of which were placed on production late in the quarter.
Cabot is not currently operating a rig in the Eagle Ford Shale and plans to drill 3 additional wells in 2016, all of which are scheduled for the second half of the year.
Non-Core Asset Sale
During the first quarter of 2016, the Company completed the divestiture of certain non-core oil and gas properties in East Texas to an undisclosed buyer for approximately $57 million. At December 31, 2015, proved reserves associated with these properties were 16.7 Bcfe (80% natural gas / 15% NGLs / 5% oil).
Financial Position and Liquidity
During the first quarter of 2016, Cabot closed on an offering of 50.6 million shares of its common stock (including the over-allotment option) for net proceeds of $995.6 million. The Company used a portion of the net proceeds to repay borrowings outstanding under its revolving credit facility.
As of March 31, 2016, Cabot had total debt of $1.6 billion and cash on hand of $579.3 million. The Company’s net debt to adjusted capitalization ratio and net debt to trailing twelve months EBITDAX ratio were 25.8 percent and 1.6x, respectively, compared to 50.1 percent and 2.5x as of December 31, 2015.
Effective April 19, 2016, Cabot’s borrowing base was unanimously approved by its 20 lenders at $3.2 billion. With $1.6 billion of senior notes outstanding, this leaves the Company with approximately $1.6 billion of available commitments under the $1.8 billion credit facility. The Company currently has no debt outstanding under the credit facility, resulting in approximately $2.2 billion of liquidity. Cabot’s next annual borrowing base redetermination is scheduled for April 2017.
2016 Derivative Position Update
The Company has approximately 52 Bcf of natural gas swaps for the period of April to October 2016 at a weighted average price of approximately $2.51 per Mcf and 1.4 Mmbbls of crude oil collars for the period of April to December 2016 at a weighted average floor and ceiling price of $38.00 per Bbl and $47.28 per Bbl, respectively.
Second Quarter and Full Year 2016 Guidance
Cabot has provided second quarter net production guidance of 1,575 to 1,600 Mmcf per day for natural gas; 11,500 to 12,250 Bbls per day for crude oil and condensate; and 1,400 to 1,600 Bbls per day for NGLs. The Company expects its natural gas price realizations (before the impact of hedges) to average between $0.50 and $0.55 below NYMEX settlement prices for the second quarter based on current market indications.
Cabot has reaffirmed its $325 million capital budget and its production growth guidance range of 2 to 7 percent for 2016. The Company has also adjusted its 2016 guidance range for contributions to its equity method investments in the Constitution and Atlantic Sunrise pipelines to $30 million to $35 million, down from $80 million to $150 million, to reflect the current expectation for a second half of 2017 in-service date for Atlantic Sunrise and a second half of 2018 in-service date for Constitution. (Original Source)
Shares of COG closed yesterday at $23.58, down $0.49 or -2.04%. 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 $22.74 and its 200-day moving average is $20.35.
On the ratings front, COG has been the subject of a number of recent research reports. In a report issued on April 25, Morgan Stanley analyst Drew Venker reiterated a Hold rating on COG, with a price target of $20, which implies a downside of 15.2% from current levels. Separately, on April 15, Tudor Pickering’s Matthew Portillo downgraded the stock to Hold .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Drew Venker and Matthew Portillo have a total average return of 1.2% and 4.5% respectively. Venker has a success rate of 45.0% and is ranked #1979 out of 3837 analysts, while Portillo has a success rate of 52.6% and is ranked #1384.
Overall, 4 research analysts have assigned a Hold rating and 2 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $21.50 which is -8.8% under where the stock closed yesterday.
Cabot Oil & Gas Corp. is an independent oil and gas company. It is engaged in the development, exploitation, exploration, production and marketing of natural gas, crude oil and, to a lesser extent, natural gas liquids from its properties in the continental U.S. The company also transports, stores, gathers and produces natural gas for resale. Its exploitation and exploration activities are concentrated in areas with known hydrocarbon resources, which are conducive to multi-well, repeatable drilling programs. Cabot Oil & Gas was founded in 1989 and is headquartered in Houston, TX.