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Why Is Cabot (COG) Down 22.7% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Cabot Oil (COG). Shares have lost about 22.7% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Cabot Q2 Earnings Beat, Lowers Production Guidance

Cabot Oil & Gas Corporation reported second-quarter 2019 earnings per share — adjusted for special items — of 36 cents, surpassing the Zacks Consensus Estimate of 33 cents and the year-ago figure of 13 cents.

The strong results can be attributed to lower costs and slightly higher-than-anticipated production. Precisely, the company’s production came in at 213.8 billion cubic feet equivalent (Bcfe), just ahead of the Zacks Consensus Estimate of 213 Bcfe.

The company’s quarterly revenues of $534.1 million outpaced the Zacks Consensus Estimate of $491 million. Further, the reported figure was above the prior-year quarter’s revenues of $453.4 million.

In more good news for investors, the natural gas explorer said that it is expanding its share-buyback program by 25 million shares.

Production, Prices, Costs & Drilling Statistics

In the quarter under review, Cabot’s overall production totaled 213.8 Bcfe – 100% natural gas – 24% higher than the prior-year quarter volume of 172.4 Bcfe.

Average realized natural gas price (excluding hedges) rose to $2.20 per thousand cubic feet from the year-ago quarter’s $2.11. The Zacks Consensus Estimate called for a price of $2.19 per thousand cubic feet.

Total operating expenses were 23.7% lower than the second quarter of 2018, decreasing to $287 million. While transportation and gathering costs were up 24.1% year over year to $141.7 million, Cabot did not incur any operating expense in brokered natural gas activity for which it shelled out $80.1 million in the year-ago period.

Notably, total average unit costs declined to $1.41 per thousand cubic feet equivalent (Mcfe) from the year-ago figure of $1.85.

Cabot drilled 24 wells and completed 28 during the quarter.

Financial Position

Operating cash flows were $326.7 million (up 19.3% year over year), while capital expenditures totaled $225.9 million (down 2.2%). Free cash flow (FCF) — which is a key metric to gauge a company’s financial health — was $72.7 million during the second quarter, turning around from a negative $62 million a year ago. As of Jun 30, 2019, the company had cash and cash equivalents of $241.4 million and total debt of $1.2 billion, with a debt-to-capitalization ratio of 34.2%.

Share Repurchase Program

Through the second quarter, the company bought back 5.1 million shares at a weighted average share price of $24.63.

Guidance

For the third quarter, Cabot provided its net production guidance in the range of 2,360-2,410 million cubic feet equivalent a day. Meanwhile, the company adjusted its full-year production growth guidance to a range of 16 to 18%, down from the previous projection of 20%. The downward revision was attributed to a change in operating plan that will push out some production to late December or early January.

Finally, Cabot raised its full-year capital expenditure projection to $800-$820 million, as against $800 previously. The uptick reflects incremental drilling and completion activity.

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?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Cabot has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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