Independent oil and gas exploration and production (E&P)
Cabot Oil & Gas Corporation
) reported stellar fourth quarter 2012 results, owing to enhanced
output and higher crude oil prices, partially offset by lower
realized natural gas prices.
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The company posted earnings per share (excluding special items)
of 27 cents, comfortably beating the Zacks Consensus Estimate of
21 cents. Cabot's performance also improved from the year-ago
adjusted profit of 20 cents per share.
During the three-month period ended Dec 31, 2012, Cabot generated
operating revenues of $369.9 million (up 38.0% year over year)
with the help of healthier production. The result was also above
the Zacks Consensus Estimate of $350.0 million.
Overall production during the quarter was 78.8 billion cubic feet
equivalent (Bcfe) - 95% gas - up 43.8% from the prior-year
quarter. Natural gas volumes jumped 45.0% year over year to 74.8
billion cubic feet (Bcf), while liquid volumes shot up 23.7% to
647 thousand barrels (MBbl). The driving force behind the
increase in natural gas production was the Appalachia region,
where volumes swelled 54.6%.
The average realized natural gas price fell 2.7% from the
corresponding period of 2011 to $3.91 per thousand cubic feet
(Mcf), while average oil price realization moved up 14.7% to
$105.40 per barrel.
Costs & Expenses
Transportation and gathering costs and taxes (other than income)
came in at $45.5 million (up 84.8% year over year) and $9.0
million (up 38.3%) respectively. As a result, total operating
expenses increased 26.2% over the fourth quarter of 2011 to
Cabot's year-end 2012 proved reserves increased 26.7% from the
2011 level to 3,842.4 billion cubic feet equivalent (bcfe). This
marked the third successive year of reserve growth of above
Drilling Statistics, Capital Expenditure & Balance
Net wells drilled during the quarter increased to 36 (from 29 in
the year-ago period) with a 99% success rate. Operating cash
flows were $197.0 million for the quarter, while capital
expenditures were $258.8 million. As of Dec 31, 2012, the company
had $1,087.0 million in total debt, with a debt-to-capitalization
ratio of 33.8%.
Cabot guides its 2013 volume growth in the range of 35% to 50%,
including an expected liquid growth of 35% to 50%.
The company currently retains a Zacks Rank #3 (Hold), implying
that it is expected to perform in line with the
broader U.S. equity market over the next 1 to 3 months.
Cabot Oil & Gas Corp.'s diversified asset portfolio is spread
between low-risk/long reserve-life Appalachian assets and
large-volume/rapid-payout Gulf Coast properties, with further
variety from large prospect inventories in the Rocky Mountains
and the Anadarko Basin that have a broad mix of production and
Additionally, the company has hedged around 45% of its projected
2013 production at attractive prices. This lowers the company's
near-term commodity-price exposure, which is a key positive for
Cabot's risk profile, given the current market concerns.
However, Cabot's high natural gas exposure raises its sensitivity
to gas price fluctuations, compared to its more-diversified
independent peers with higher oil production.
But there are other E&P companies that are expected to
perform well in the coming 1 to 3 months. These include
Penn Virginia Corporation
Anadarko Petroleum Corporation
). All three have a Zacks Rank #2 (Buy).