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Shale oil and gas play Cabot Oil & Gas announced better than expected Q2 earnings Friday but $COG fell over 12% after the company lowered its 2019 production growth estimate to 16%–18% from 20% and raised CAPEX. Lower natural gas prices weighed also.

Cabot Marcellus

Cabot Oil & Gas Corporation NYSE: COG Earnings Beat Before Open Friday

$3.18 beat $3.10 EPS and $30.59 billion beat forecast in revenue 

Earnings

Cabot Oil & Gas COG reported a profit of $181.0 million (or $0.43 per share); adjusted net income (non-GAAP) of $150.6 million (or $0.36 per share), beating the consensus estimate of $0.33 per share. This compares to earnings of $0.13 per share a year ago. These figures are adjusted for non-recurring items. Cabot posted revenues of $534.12 million for the quarter beating consensus estimate $494.30. This compares to year-ago revenues of $453.45 million.

Cabot Oil & Gas Corporation NYSE: COG

Market Reaction > $19.16 −2.63 (-12.07%)

Highlights

Cabot delivered "positive free-cash-flow generation, improved return on capital employed, and disciplined growth in per-share metrics, while continuing to return capital to shareholders through ... dividends and opportunistic share repurchases," Chief Executive Dan Dinges said in a statement.

  • Net cash provided by operating activities of $326.7 million; discretionary cash flow (non-GAAP) of $301.9 million • Free cash flow (non-GAAP) of $72.7 million
  • Return on capital employed (ROCE) (non-GAAP) for the trailing twelve months of 23.5 percent
  • Returned $163.4 million of capital to shareholders through dividends and share repurchases
  • Daily equivalent production of 2,349 million cubic feet equivalent (Mmcfe) per day, an increase of 24 percent relative to the prioryear comparable quarter 
  • Improved operating expenses per unit by 24 percent relative to the prior-year comparable quarter

Marcellus Shale Update

  • ~2,900 Remaining Undrilled Locations
  • Year-End 2018 Net Operated Producing Horizontal Wells: 647
  • 2018 Wells Placed on Production: 84 Net Wells
  • 2019E Wells Drilled and Completed: ~90 Net Wells
  • 2019E Wells Placed on Production: ~85 Net Wells
  • 2018 Year-End Proved Reserves: 11.6 Tcfe (19% growth year-over-year, 25% per debt-adjusted share2 )
  • 2018 Production: 2,014 Mmcfe/d (7% growth year-over-year, 12% per debt-adjusted share2 )
  • 2019E Production Growth: 16% - 18% (24% - 26% per debt-adjusted share2 )
  • 2019E Capital Expenditures: $800 - $820 million;

Outlook

Cabot Oil & Gas lowered its 2019 production growth estimate to 16%–18% from 20%. Att he same time its capital budget is expected to rise by up to $20 million. In 2020, Cabot Oil & Gas expects its production growth to moderate to 5% and its total capital budget to fall by $107.5 million YoY. Based on this year’s Henry Hub natural gas prices of $2.50 per million British thermal units, Cabot expects free cash flow of $375 million–$400 million. If natural gas prices rise by another $0.25, its overall free cash flow could increase by $150 million. The company plans to maximize shareholder value by reducing capital and generating more cash flow.

About Cabot Oil and Gas

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.

Cabot’s exploration, development and production operations are primarily concentrated in the Marcellus Shale in northeast Pennsylvania. Cabot’s 2019 capital budget is approximately $800 million. For the full year 2019, the Company plans to drill and complete 85 to 90 net wells and place 80 to 85 net wells on production.

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Marcellus Pad Graphic med

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, 2018 the Company had approximately 11.6 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.

Source: Cabot Oil and Gas

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