Why Cabot Oil & Gas slows after 2Q earnings despite beats (Part 2 of 6)
Cabot’s 2Q financial performance
Cabot Oil & Gas’ (COG) revenue for the quarter was $533 million—up ~19% on a year-over-year (or YoY) basis and up ~5% on a sequential basis. Net income, excluding selected items, for the quarter was $115 million—an increase of 29% over last year’s comparable quarter and ~8% increase compared to the previous quarter.
Increase in revenues and net income were driven by increase in Marcellus and Eagle Ford output which increased 41% and 76%, respectively, on YoY basis.
Operating expenses higher on account of transportation costs
Operating expenses increased 13% YoY and 2.4% quarter-over-quarter. This was mainly due to transportation and gathering costs which were 59.5% higher YoY, and exploration expenses, which were 3.3% higher compared to that for the same period last year.
Free cash flow up despite price differentials
Discretionary cash flow amounted to $332 million—an increase of ~12% over last year’s comparable quarter and ~4% increase compared to the previous quarter.
For the quarter, Cabot generated ~$50 million as free cash flow. This is positive as it depicts that the company, despite the lower natural gas prices, generated free cash by achieving significant production levels.
COG is a component of several key exchange-traded funds (or ETFs) including the Energy Select Sector SPDR Fund (XLE), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the iShares U.S. Energy ETF (IYE), and the Vanguard Energy ETF (VDE).
The following section discusses COG’s operational performance and future plans in greater detail.
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