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Cabot (COG) Q4 Earnings Miss, Cash Flow & Reserves Jump

Nilanjan Choudhury

Domestic energy explorer Cabot Oil & Gas Corporation COG reported fourth quarter earnings per share – adjusted for special items – of 55 cents, below the Zacks Consensus Estimate of 58 cents due to lower-than-anticipated production. Precisely, the company’s production came in at 206.3 billion cubic feet equivalent (Bcfe), lagging the Zacks Consensus Estimate of 208 Bcfe.

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.

 

Cabot Oil & Gas Corporation Price, Consensus and EPS Surprise

Cabot Oil & Gas Corporation Price, Consensus and EPS Surprise | Cabot Oil & Gas Corporation Quote

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 – which boasts of a 1 billion cubic feet per day of secured gas transport capacity on The Williams Companies Inc.’s WMB Atlantic Sunrise project – 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).

Zacks Rank and Key Stock Picks

Cabot currently retains a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Enbridge Inc. ENB and NuStar Energy L.P. NS. Both have Zacks Rank #2 (Buy).

(You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)

Enbridge’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average positive surprise being 31.8%.

The 2019 Zacks Consensus Estimate for NuStar is $1.10, representing 64.2% earnings per unit growth over 2018. Next year’s average forecast is $1.32 pointing to another 20.3% growth.

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