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.
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).
ANADARKO PETROL (APC): Free Stock Analysis
CABOT OIL & GAS (COG): Free Stock Analysis
HYPERDYNAMICS (HDY): Get Free Report
PENN VIRGINIA (PVA): Free Stock Analysis
To read this article on Zacks.com click here.