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Cabot (COG) Down 1.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Cabot Oil (COG). Shares have lost about 1.2% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cabot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Cabot Q1 Earnings Beat, Hikes Dividend

Cabot Oil & Gas Corporation reported first-quarter 2019 earnings per share — adjusted for special items — of 73 cents, surpassing the Zacks Consensus Estimate of 67 cents on the back of lower average unit costs, and price and output gains. The bottom line also increased significantly from the year-ago level of 28 cents.

However, the Texas-based upstream player reported revenues of 641.7 million, lagging the Zacks Consensus Estimate of 676 million. The top line, however, increased 35% from a year ago.

Bringing good news for investors, the natural gas explorer raised quarterly dividend by 29% to 9 cents per share. This marks the fourth payout hike in the last two years. The dividend will be payable on May 29, 2019 to its shareholders of record as of May 15.

Production, Prices, Costs & Drilling Statistics

Cabot’s overall production during the quarter totaled 204.8 billion cubic feet equivalent (Bcfe) — 100% gas — up 20.7% from the prior-year quarter’s 169.6 Bcfe. The average realized natural gas price (excluding hedging) increased 23.6% from the year-ago quarter to $3.09 per thousand cubic feet. Cabot drilled 25 net wells and completed 14 during the quarter.

Total average unit costs declined to $1.48 per thousand cubic feet equivalent (Mcfe) from the year-ago figure of $1.58. While depreciation charges, interest expenses, general/administrative and direct costs per Mcfe declined, transportation and exploration expenses increased.

Financial Position

Operating cash flows were $585.3 million in the quarter (up 114.6% year over year), while capital expenditures totaled $195.6 million (up 25%). Free cash flow (FCF) — which is a key metric to gauge a company’s financial health— soared 248% y/y to $308.4 million. As of Mar 31, 2019, Cabot had $315 million in cash/cash equivalents and $1.2 billion in long-term debt, with a debt-to-capitalization ratio of 34.4%.

Guidance

For the second quarter, Cabot provided its net production guidance in the range of 2,300-2,350 million cubic feet equivalent a day. Cabot reiterated full-year production growth guidance at 20%, based on a capital expenditure projection of $800 million.

 

However, the exploration and production firm’s bottom line witnessed a healthy improvement from the year-ago quarter’s adjusted profit of 13 cents on higher realized natural gas prices.

 

 

Houston, TX-based Cabot’s quarterly revenue improved 78.9% year over year to $716.3 million and beat the Zacks Consensus Estimate of $655 million.

 

 

Production, Prices & Drilling Statistics

 

Cabot’s overall production during the quarter totaled 206.3 Bcfe – 100% gas – up 19.5% from the prior year quarter volume of 172.6 Bcfe. However, output came below the Zacks Consensus Estimate of 208 Bcfe. The average realized natural gas price increased 42.7% from the year-ago quarter to $3.11 per thousand cubic feet. Cabot drilled 37 net wells and completed 33 during the quarter.

 

Costs & Expenses

 

Total operating expenses were 49.5% lower than the fourth quarter of 2017, declining to $376.3 million. While transportation and gathering costs were up 17.9% year over year to $140.9 million, the absence of oil and gas property write-offs – that amounted to $414.3 million in the year-ago quarter – aided the significant fall in operating expenses. Meanwhile, Cabot’s depreciation, depletion and amortization expenses fell 9.7% from the year-ago period to $129.3 million.

 

 

Financial Position

 

Operating cash flows were $316.1 million for the quarter (up 76.4% year over year), while capital expenditures totaled $247 million (up 38.9%). As of Dec 31, 2018, the company had $1.2 billion in long-term debt, with a debt-to-capitalization ratio of 37%. During the quarter, Cabot repurchased approximately $259 million of its stock.

 

Proved Reserves

 

As of year-end 2018, Cabot had 11.6 trillion cubic feet equivalent in proved reserves, up 19% year over year.

 

Guidance

 

For the first quarter, Cabot provided its net production guidance in the range of 2,250-2,275 million cubic feet equivalent a day. Cabot also revised its expectations for 2019. It projects the production growth to be 20% as against the previous guidance in the 20-25% range. The production growth is based on a capital expenditure projection of $800 million (the earlier range was between $800-$850 million).

However, the exploration and production firm’s bottom line witnessed a healthy improvement from the year-ago quarter’s adjusted profit of 13 cents on higher realized natural gas prices.

 

 

Houston, TX-based Cabot’s quarterly revenue improved 78.9% year over year to $716.3 million and beat the Zacks Consensus Estimate of $655 million.

 

 

Production, Prices & Drilling Statistics

 

Cabot’s overall production during the quarter totaled 206.3 Bcfe – 100% gas – up 19.5% from the prior year quarter volume of 172.6 Bcfe. However, output came below the Zacks Consensus Estimate of 208 Bcfe. The average realized natural gas price increased 42.7% from the year-ago quarter to $3.11 per thousand cubic feet. Cabot drilled 37 net wells and completed 33 during the quarter.

 

Costs & Expenses

 

Total operating expenses were 49.5% lower than the fourth quarter of 2017, declining to $376.3 million. While transportation and gathering costs were up 17.9% year over year to $140.9 million, the absence of oil and gas property write-offs – that amounted to $414.3 million in the year-ago quarter – aided the significant fall in operating expenses. Meanwhile, Cabot’s depreciation, depletion and amortization expenses fell 9.7% from the year-ago period to $129.3 million.

 

 

Financial Position

 

Operating cash flows were $316.1 million for the quarter (up 76.4% year over year), while capital expenditures totaled $247 million (up 38.9%). As of Dec 31, 2018, the company had $1.2 billion in long-term debt, with a debt-to-capitalization ratio of 37%. During the quarter, Cabot repurchased approximately $259 million of its stock.

 

Proved Reserves

 

As of year-end 2018, Cabot had 11.6 trillion cubic feet equivalent in proved reserves, up 19% year over year.

 

Guidance

 

For the first quarter, Cabot provided its net production guidance in the range of 2,250-2,275 million cubic feet equivalent a day. Cabot also revised its expectations for 2019. It projects the production growth to be 20% as against the previous guidance in the 20-25% range. The production growth is based on a capital expenditure projection of $800 million (the earlier range was between $800-$850 million).

However, the exploration and production firm’s bottom line witnessed a healthy improvement from the year-ago quarter’s adjusted profit of 13 cents on higher realized natural gas prices.

 

 

Houston, TX-based Cabot’s quarterly revenue improved 78.9% year over year to $716.3 million and beat the Zacks Consensus Estimate of $655 million.

 

 

Production, Prices & Drilling Statistics

 

Cabot’s overall production during the quarter totaled 206.3 Bcfe – 100% gas – up 19.5% from the prior year quarter volume of 172.6 Bcfe. However, output came below the Zacks Consensus Estimate of 208 Bcfe. The average realized natural gas price increased 42.7% from the year-ago quarter to $3.11 per thousand cubic feet. Cabot drilled 37 net wells and completed 33 during the quarter.

 

Costs & Expenses

 

Total operating expenses were 49.5% lower than the fourth quarter of 2017, declining to $376.3 million. While transportation and gathering costs were up 17.9% year over year to $140.9 million, the absence of oil and gas property write-offs – that amounted to $414.3 million in the year-ago quarter – aided the significant fall in operating expenses. Meanwhile, Cabot’s depreciation, depletion and amortization expenses fell 9.7% from the year-ago period to $129.3 million.

 

 

Financial Position

 

Operating cash flows were $316.1 million for the quarter (up 76.4% year over year), while capital expenditures totaled $247 million (up 38.9%). As of Dec 31, 2018, the company had $1.2 billion in long-term debt, with a debt-to-capitalization ratio of 37%. During the quarter, Cabot repurchased approximately $259 million of its stock.

 

Proved Reserves

 

As of year-end 2018, Cabot had 11.6 trillion cubic feet equivalent in proved reserves, up 19% year over year.

 

Guidance

 

For the first quarter, Cabot provided its net production guidance in the range of 2,250-2,275 million cubic feet equivalent a day. Cabot also revised its expectations for 2019. It projects the production growth to be 20% as against the previous guidance in the 20-25% range. The production growth is based on a capital expenditure projection of $800 million (the earlier range was between $800-$850 million).

 

 

However, the exploration and production firm’s bottom line witnessed a healthy improvement from the year-ago quarter’s adjusted profit of 13 cents on higher realized natural gas prices.

 

 

Houston, TX-based Cabot’s quarterly revenue improved 78.9% year over year to $716.3 million and beat the Zacks Consensus Estimate of $655 million.

 

 

Production, Prices & Drilling Statistics

 

Cabot’s overall production during the quarter totaled 206.3 Bcfe – 100% gas – up 19.5% from the prior year quarter volume of 172.6 Bcfe. However, output came below the Zacks Consensus Estimate of 208 Bcfe. The average realized natural gas price increased 42.7% from the year-ago quarter to $3.11 per thousand cubic feet. Cabot drilled 37 net wells and completed 33 during the quarter.

 

Costs & Expenses

 

Total operating expenses were 49.5% lower than the fourth quarter of 2017, declining to $376.3 million. While transportation and gathering costs were up 17.9% year over year to $140.9 million, the absence of oil and gas property write-offs – that amounted to $414.3 million in the year-ago quarter – aided the significant fall in operating expenses. Meanwhile, Cabot’s depreciation, depletion and amortization expenses fell 9.7% from the year-ago period to $129.3 million.

 

 

Financial Position

 

Operating cash flows were $316.1 million for the quarter (up 76.4% year over year), while capital expenditures totaled $247 million (up 38.9%). As of Dec 31, 2018, the company had $1.2 billion in long-term debt, with a debt-to-capitalization ratio of 37%. During the quarter, Cabot repurchased approximately $259 million of its stock.

 

Proved Reserves

 

As of year-end 2018, Cabot had 11.6 trillion cubic feet equivalent in proved reserves, up 19% year over year.

 

Guidance

 

For the first quarter, Cabot provided its net production guidance in the range of 2,250-2,275 million cubic feet equivalent a day. Cabot also revised its expectations for 2019. It projects the production growth to be 20% as against the previous guidance in the 20-25% range. The production growth is based on a capital expenditure projection of $800 million (the earlier range was between $800-$850 million).

However, the exploration and production firm’s bottom line witnessed a healthy improvement from the year-ago quarter’s adjusted profit of 13 cents on higher realized natural gas prices.

 

 

Houston, TX-based Cabot’s quarterly revenue improved 78.9% year over year to $716.3 million and beat the Zacks Consensus Estimate of $655 million.

 

 

Production, Prices & Drilling Statistics

 

Cabot’s overall production during the quarter totaled 206.3 Bcfe – 100% gas – up 19.5% from the prior year quarter volume of 172.6 Bcfe. However, output came below the Zacks Consensus Estimate of 208 Bcfe. The average realized natural gas price increased 42.7% from the year-ago quarter to $3.11 per thousand cubic feet. Cabot drilled 37 net wells and completed 33 during the quarter.

 

Costs & Expenses

 

Total operating expenses were 49.5% lower than the fourth quarter of 2017, declining to $376.3 million. While transportation and gathering costs were up 17.9% year over year to $140.9 million, the absence of oil and gas property write-offs – that amounted to $414.3 million in the year-ago quarter – aided the significant fall in operating expenses. Meanwhile, Cabot’s depreciation, depletion and amortization expenses fell 9.7% from the year-ago period to $129.3 million.

 

 

Financial Position

 

Operating cash flows were $316.1 million for the quarter (up 76.4% year over year), while capital expenditures totaled $247 million (up 38.9%). As of Dec 31, 2018, the company had $1.2 billion in long-term debt, with a debt-to-capitalization ratio of 37%. During the quarter, Cabot repurchased approximately $259 million of its stock.

 

Proved Reserves

 

As of year-end 2018, Cabot had 11.6 trillion cubic feet equivalent in proved reserves, up 19% year over year.

 

Guidance

 

For the first quarter, Cabot provided its net production guidance in the range of 2,250-2,275 million cubic feet equivalent a day. Cabot also revised its expectations for 2019. It projects the production growth to be 20% as against the previous guidance in the 20-25% range. The production growth is based on a capital expenditure projection of $800 million (the earlier range was between $800-$850 million).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.77% due to these changes.

VGM Scores

At this time, Cabot has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cabot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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