Cabot Oil & Gas Corporation (COG, Financial)Â last month reported its financial and operating results for the second quarter of 2014.
Highlights for the quarter:
- Production of 127.6 billion cubic feet equivalent (Bcfe), an increase of 34 percent over last year's comparable quarter
- Liquids production (crude oil/condensate/natural gas liquids) of 961,000 barrels, an increase of 26 percent over last year's comparable quarter as reported and an increase of 64 percent pro forma for last year's Mid-Continent and West Texas asset sales
- Crude oil and condensate production of 869,000 barrels, an increase of 25 percent over last year's comparable quarter as reported and an increase of 65 percent pro forma for last year's Mid-Continent and West Texas asset sales
- Net income excluding selected items of $115.3 million, an increase of 21 percent over last year's comparable quarter
- Discretionary cash flow of $332.3 million, an increase of 12 percent over last year's comparable quarter
- Total unit costs (including financing) of $2.59 per thousand cubic feet equivalent (Mcfe), a 16 percent improvement over last year's comparable quarter
Second quarter 2014 financial results
Equivalent production in the second quarter of 2014 was 127.6 Bcfe, consisting of 121.8 billion cubic feet (Bcf) of natural gas and 961,000 barrels of liquids. These figures represent increases of 34 percent, 34 percent and 26 percent, respectively. "Our total liquids volumes increased 40 percent sequentially –Â with crude oil and condensate volumes increasing 44 percent –Â due to strong well performance from new Eagle Ford wells that were placed on production during the quarter," commented Dan O. Dinges, chairman, president, and chief executive officer.
Cash flow from operations in the second quarter of 2014 was $329.6 million, compared to $277.3 million in the second quarter of 2013. Discretionary cash flow in the second quarter of 2014 was $332.3 million, compared to $297.1 million in the second quarter of 2013. Net income in the second quarter of 2014 was $118.4 million, or $0.28 per share, compared to $89.1 million, or $0.21 per share, in the second quarter of 2013. Excluding the effect of selected items (detailed in the table below), net income was $115.3 million, or $0.28 per share, in the second quarter of 2014, compared to $95.0 million, or $0.22 per share, in the second quarter of 2013.
Natural gas price realizations, including the effect of hedges, were $3.47 per thousand cubic feet (Mcf) in the second quarter of 2014, down 15 percent compared to the second quarter of 2013. Excluding the impact of hedges, natural gas price realizations for the quarter were $3.78 per Mcf, representing an $0.89 discount to NYMEX settlement prices. Oil price realizations, including the effect of hedges, were $98.84 per barrel (Bbl), down 3 percent compared to the second quarter of 2013. "Despite lower realized commodity prices, Cabot generated free cash flow during the quarter while growing equivalent production by 34 percent year-over-year," stated Dinges.
Total per unit costs (including financing) decreased to $2.59 per Mcfe in the second quarter of 2014, down 16 percent from $3.10 per Mcfe in the second quarter of 2013. All operating expense categories decreased on a per unit basis relative to last year's comparable quarter except for transportation and gathering expense, which increased as a result of slightly higher transportation rates and the commencement of new transportation agreements.
Year-to-date 2014 financial results:
Production during the six-month period ended June 30, 2014 was 247.5 Bcfe, consisting of 237.6 Bcf of natural gas and 1.6 million barrels of liquids. These figures represent increases of 34 percent, 35 percent, and 13 percent, respectively, compared to the six-month period ended June 30, 2013.
For the six-month period ended June 30, 2014, cash flow from operations was $584.9 million, compared to $490.0 million for the six-month period ended June 30, 2013. Discretionary cash flow was $651.8 million for the six-month period ended June 30, 2014, compared to $531.5 million for the six-month period ended June 30, 2013.
For the six-month period ended June 30, 2014, net income was $225.5 million, or $0.54 per share, compared to $131.9 million, or $0.32 per share, for the six-month period ended June 30, 2013. Excluding the effect of selected items (detailed in the table below), net income was $225.0 million, or $0.54 per share, compared to $149.1 million, or $0.36 per share, for the six-month period ended June 30, 2013.
Hedging update:
Effective April 1, 2014, the Company elected to discontinue hedge accounting for its commodity derivatives on a prospective basis. Subsequent to April 1, 2014, the Company's derivative instruments are accounted for on a mark-to-market basis with changes in fair value recognized in earnings; however, these mark-to-market adjustments will have no cash flow impact. The Company recognized an unrealized mark-to-market gain of $12.9 million in the second quarter of 2014.
Financial position and liquidity:
As of June 30, 2014, the company's net debt to adjusted capitalization ratio was 32.3 percent, compared to 33.8 percent at December 31, 2013 (detailed in the table below). The company's total debt was $1,193 million, of which $506 million is outstanding under the Company's revolving credit facility. Total lender commitments under the revolving credit facility are $1.4 billion, with $893 million of available credit under the facility at June 30, 2014.
