Cabot Oil and Gas $COG Misses Earnings, Raises Production Guidance

Cabot Oil & Gas $COG announced less than expected second second quarter 2017 results before the market open Friday. A highlight was Cabot generated positive free cash flow for the fifth consecutive quarter. 

Cabot Oil & Gas $COG announced second quarter 2017 results before the market open Friday. $COG reported a loss in the same period a year earlier. The company raised production guidance in their webcast with an expected 8-12% growth.

A highlight was Cabot generated positive free cash flow for the fifth consecutive quarter. Natural gas price realizations improved.

Earnings: Profit of 5 cents per share. , adjusted for non-recurring costs, were 14 cents per share, missing of 15 cents per share. Revenue $460.5 million beating expected $459.2 million.

Reaction: Cabot Oil & Gas Corporation NYSE: COG Lunch 25.54 +0.35 (+1.41%)

Cabot Oil & Gas Overview

  • 2016 Production: 627 Bcfe (4% growth)
  • 2016 Year-End Proved Reserves: 8.6 Tcfe (5% growth)
  • 2017E Net D&C Activity: 95 wells drilled / 90 wells completed
  • 2017E Production Growth: 8% – 12%
  • 2017E Total Program Spending: $845 mm (includes $70 mm of pipeline investments and up to $125 mm of exploratory leasing / testing capital)

Marcellus

  • >3,000 Remaining Undrilled Locations
  • Year-End 2016 Net Producing Horizontal Wells: 517
  • 2017E Net D&C activity: 60 wells drilled / 51 wells completed
  • Inventory Life Based on 2017E Activity: ~50 years

EAGLE FORD SHALE

  • >1,100 Remaining Undrilled Locations
  • Year-End 2016 Net Producing Horizontal Wells: 207
  • 2017E Net D&C activity: 30 wells drilled / 39 wells completed
  • Inventory Life Based on 2017E Activity: ~36 years

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Guidance

2017 Guidance  Full-year 2017

  • total company production growth guidance: 8% – 12%

 Full-year 2017 oil production growth: 10% – 15%

 2017 exit-to-exit oil production growth: 40% – 50%

 2017 total program spending (including equity pipeline investments): $845 million

  • – 2017 E&P capital budget: $775 million

 79% of E&P capital budget allocated to drilling, completion and facilities

 Drilling, completion and facilities capital by operating area: 67% Marcellus Shale / 33% Eagle Ford Shale

 Includes up to $125 million of exploratory leasing / testing capital ($91 million spent through Q2 2017) – 2017 equity pipeline investments: $70 million (assumes a July 1, 2018 in-service date for Atlantic Sunrise)

 2017 drilling and completion activity guidance: – 95 net wells drilled (60 Marcellus / 30 Eagle Ford / 5 Exploration) – 90 net wells completed (51 Marcellus / 39 Eagle Ford)

 2017 income tax rate guidance: 38%

 2017 deferred tax rate guidance : 90%

Q3 2017 Net Production Guidance

  • Natural Gas (Mmcf/d) 1,750 – 1,800 Oil (Bbls/d) 13,000 – 13,750
  • Natural Gas Liquids (Bbls/d) 1,350 – 1,450 Q3 2017
  • Natural Gas Price Exposure By Index Fixed Price (~$2.12) 42%
  • Leidy Line Receipts 15% TGP Zone 4 – 300 Leg 15%
  • NYMEX 13% Columbia 6% Dominion 5% Millennium East 4%

Note: An additional deduct of ~$0.05 per Mcf should be applied to account for fuel use FY 2017 Cost Assumptions ($/Mcfe, unless otherwise noted) Direct operations $0.15 – $0.16

  • Transportation and gathering $0.70 – $0.71
  • Taxes other than income $0.05 – $0.06
  • Depreciation, depletion and amortization $0.85 – $0.95
  • Interest expense $0.12 – $0.13
  • General and administrative ($mm)2 $55 – $60
  • Exploration3 ($mm) $18 – $20 (1) Based on July 2017 strip

About Cabot Oil and Gas

Cabot Oil & Gas Corporation is an independent oil and gas company engaged in the development, exploitation and exploration of oil and gas properties exclusively in the continental United States. As of December 31, 2016 the Company had approximately 8.6 Tcfe of total proved reserves. Cabot continues to refine its operating focus, narrowing its natural gas development effort to the Marcellus Shale in northeast Pennsylvania and its oil development effort to the Eagle Ford Shale in south Texas.

Top U.S. Natural Gas Producers:
Q1 2017 Production – MMcf/day
1 ExxonMobil 3,011
2 Chesapeake Energy 2,344 
3 Southwestern Energy Co. 2,033
4 Anadarko 1,859 
5 EQT 1,827+ 
6 Cabot Oil & Gas 1,820 
7 BP 1,594 
8 Antero Resources 1,544 
9 Range Resources 1,292 
10 Rice Energy 1,258+

+ EQT bought Rice Energy for $6.7 Billion, After closing the Rice deal EQT’s output will total 3.6 billion cubic feet per day of natural gas, going ahead of the U.S. production of Exxon Mobil and Chesapeake Energy.

MARCELLUS SHALE

Since the inception of Cabot’s horizontal drilling program in 2008, the Company’s Marcellus Shale position in northeast Pennsylvania has developed into the cornerstone asset of its portfolio and has been the primary driver of record production and reserve growth during this period.

The Company plans to drill approximately 60 net wells in the Marcellus Shale during 2017, with approximately 67% of the Company’s drilling and completion capital allocated to the area.

Cabot has approximately 179,000 net acres in the dry gas window of the Marcellus Shale, primarily in Susquehanna County, Pennsylvania. Cabot’s Marcellus Shale properties accounted for 93% of both the Company’s proved reserves and total net production as of year-end 2016.

EAGLE FORD SHALE

Cabot’s oil-weighted drilling activity is focused on its 84,000 net acre position in the Eagle Ford Shale, principally located in Atascosa, Frio and La Salle Counties, Texas.

Cabot plans to operate one rig all year in the Eagle Ford, with a focus on drilling longer laterals to maximize efficiencies. Additionally, a completion crew will be utilized all year as we anticipate a 50 percent increase in 2017 exit-to-exit oil volumes. The Company currently plans to drill approximately 30 net wells in the Eagle Ford Shale in 2017, with 33% of the Company’s drilling and completion capital allocated to the area.

Source: Cabot Oil and Gas

http://www.cabotog.com/wp-content/uploads/2017/07/Cabot-Oil-and-Gas-July-2017-Presentation.pdf

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