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Cabot Oil & Gas Q2 Earnings Beat as Yield Grows, Guides Same

Zacks Equity Research

Independent oil and gas exploration company, Cabot Oil & Gas Corporation (COG) posted strong second-quarter 2014 results. Significant higher production – especially from Marcellus and Eagle Ford Shales − during the quarter led to the improvement which was partially offset by higher operating expenses.   

Cabot reported earnings per share of 28 cents (excluding one-time items), higher than the prior-year quarter adjusted level of 22 cents. Moreover, the company beat the Zacks Consensus Estimate of 25 cents.  

Cabot Oil & Gas Corporation - Earnings Surprise | FindTheBest


During the three-month period ended Jun 30, 2014, Texas-based Cabot generated operating revenues of $533.2 million, up 18.6% year over year. The top line also surpassed the Zacks Consensus Estimate of $527.0 million.

Volume Analysis

Cabot’s overall production during the quarter totaled 127.6 billion cubic feet equivalent (Bcfe) – 95.5% gas – up 34.0% from the prior-year quarter. Natural gas volumes surged 34.3% year over year to 121.8 Bcf. Moreover, liquids volumes increased to 961 thousand barrels (MBbl) from 763 MBbl. Strong quarterly results from the Marcellus and Eagle Ford Shales drove the overall volume growth.

Realized Prices

Average realized natural gas price fell 14.5% from the year-ago quarter to $3.47 per thousand cubic feet. The average oil price realization also decreased 2.5% year over year to $98.84 per barrel.

Costs & Expenses

Transportation and gathering costs were 59.5% higher year over year, totaling $84.0 million, while exploration costs increased 3.3% to $4.7 million.

Depreciation, depletion and amortization expenses increased to $157.6 million from $151.4 million in the second quarter of 2013. Total operating expenses increased 12.8% to $321.8 million from the year-ago quarter.

Drilling Statistics, Capital Expenditure & Balance Sheet

Net wells drilled during the quarter decreased to 35 from 44 in the year-ago period. The success rate of the drilled well was 100%.

Operating cash flows came in at $329.6 million, while capital expenditures totaled $278.9 million. As of Jun 30, 2014, Cabot had $1,193.0 million in long-term debt, with a debt-to-capitalization ratio of 34.0%.

Company Guidance

Cabot retained its 2014 production guidance at 530–585 Bcfe.

The company also maintained its 2014 capital budget at $1.375–$1.475 billion.  

Zacks Rank & Stock Picks

Cabot currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the same industry like VOC Energy Trust (VOC), Clayton Williams Energy Inc. (CWEI) and EXCO Resources Inc. (XCO). All these stocks sport a Zacks Rank #1 (Strong Buy).

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