Exhibit 99.1
| | |
| FOR RELEASE | | FOR MORE INFORMATION CONTACT |
| October 28, 2004 | | Scott Schroeder (281) 589-4993 |
CABOT OIL & GAS REPORTS THIRD QUARTER RESULTS
HOUSTON, October 28, 2004—Cabot Oil & Gas Corporation (NYSE: COG) today announced third quarter net income of $17.8 million, or $0.55 per share, compared to $22.7 million, or $0.70 per share, in last year’s comparable quarter. Cash flow from operations in the third quarter increased to $70.1 million in 2004 from $65.9 million in 2003, while discretionary cash flow increased to $77.0 million in 2004 versus $63.9 million in 2003.
“Highlights for the quarter were increased equivalent production in each of our regions versus the 2004 second quarter and record third quarter level of operating cash flow,” said Dan O. Dinges, Chairman, President and Chief Executive Officer. “The net income figure, which was impacted by two non-cash items, does not reflect the full positive impact of the quarter. The largest impact was the $4.3 million after tax mark-to-market requirement (see attached Impact of Mark-to-Market Accounting Requirements for details) for derivatives that do not qualify for hedge accounting. The rules specify that the Company record not only the current period impact of derivatives, but also the impact on all future periods. These instruments cover a portion of Cabot’s oil production. The other item was a $2.1 million after tax impairment of a two-well field in South Louisiana,” added Dinges. Excluding the non-cash impact of the mark-to-market on derivative positions not qualifying as hedges, the impairment, and a small gain on the sale of assets, the net income comparison would have been $24.2 million, or $0.75 per share, versus $21.2 million, or $0.66 per share, for the third quarters of 2004 and 2003, respectively (see attached Selected Item Review and Reconciliation for details).
Increased natural gas production and higher realized commodity prices between comparable third quarter periods were offset by lower oil production and an unrealized mark-to-market loss on oil positions, resulting in an overall reduction to operating revenues between periods. On the expense side of the equation, lower exploration expense, interest expense, and brokered natural gas cost led the way to lower overall operating expenses between comparable third quarters. Of note, general and administrative expense continues to experience growing costs associated with Sarbanes-Oxley section 404 compliance in the amount of $0.6 million
for the quarter, compared to zero last year. Also, the impact of the stock compensation plans (performance shares and restricted stock awards) has been separated from G&A for press release financial statement purposes to better reflect its impact. In addition, the mark-to-market impact of the performance shares is highlighted in an attached table.
“Operationally, I am pleased with our continued progress, particularly the increase in production quarter over quarter,” stated Dinges. “While the Gulf of Mexico hurricanes did not dramatically impact the Company, we did shut-in, deferring approximately .5 Bcfe of production leading up to and immediately following the storm.” Dinges added, “Our production guidance for the fourth quarter of 2004 has been adjusted to reflect higher expected oil volumes and lower gas volumes which have been impacted by completion delays on some of our outside operated properties, but we still anticipate sequential growth over the third quarter.” New guidance for 2005 has been posted to the Company’s website and will be discussed on the conference call on October 29.
Year-to-Date
For the nine months ended September 2004, Cabot reported net income of $56.2 million, or $1.73 per share, along with cash flow from operations of $215.9 million and discretionary cash flow of $211.3 million. These figures compare favorably with last year’s nine month net income of $1.3 million, or $0.04 per share, cash flows from operations of $205.7 million and discretionary cash flow of $194.1 million.
Again, both time frames were impacted by some of the same non-cash selected items (mark-to-market of derivatives and impairments). Taking these into account, the net income comparison would have been $66.5 million, or $2.05 per share, versus $61.5 million, or $1.92 per share last year, (see attached Selected Item Review and Reconciliation for details).
Higher realized commodity prices were offset by lower production for the comparable periods making revenues essentially flat. Removing the impairments, expenses were driven down by lower brokered natural gas costs, reduced exploration expenses and lower interest, which were partially offset by higher general and administrative, and depreciation, depletion and amortization expense.
“Last year, we were pleased to return to profitability following the first quarter impairment. This year, we have already surpassed our highest record net income for any year, highlighting the excellent results we are having both operationally and financially,” commented Dinges.
During the third quarter of 2004, the Company continued to repurchase stock under its stock purchase program. Cabot bought 86,000 shares in the third quarter at an average price of $39.42 per share in the open market. Cabot has purchased 244,100 shares during 2004 at an average price of $35.77 per share in the open market.
“Cabot will continue to focus on the repurchase of its stock as an investment strategy. We believe our stock is an attractive investment, especially when compared to the alternative investment opportunities in the current marketplace,” stated Dinges.
Late in the third quarter, Cabot added to its hedge positions five natural gas collars and one oil collar covering production in 2005. The natural gas collars cover either the first quarter or entire year, while the oil collar is for the entire year. Prices range from a $4.75 by $7.00 per Mmbtu for a full-year Rocky Mountain collar to a $7.00 by $10.35 per Mmbtu for a first quarter Henry Hub trade. During this same time frame a full-year 2005 oil trade received a $40.00 floor and a $50.50 per barrel ceiling. Details of the entire 2005 hedge program can be accessed on the Company website atwww.cabotog.com.
“Because of the volatility in the commodity markets and our recent experience with range swaps, we will target future hedge positions towards products that qualify for hedge accounting to avoid earnings swings of the magnitude we experienced in the third quarter,” added Dinges.
Conference Call
Listen in live to Cabot Oil & Gas Corporation’s 2004 third quarter financial and operating results discussion with financial analysts on Friday, October 29, at 9:30 AM EDT (8:30 AM CDT) atwww.cabotog.com. A teleconference replay will also be available at (800) 642-1687, (U.S./Canada) or (706) 645-9291 (International), passcode 1430138. A replay will be available from Friday, October 29 through Friday, November 5, 2004. The latest financial guidance, including the Company’s hedge positions, along with a replay of the webcast, which will be archived for one year, are available in the investor relations section of the Company’s website atwww.cabotog.com.
* * *
Cabot Oil & Gas Corporation, headquartered in Houston, Texas, is a leading independent natural gas producer with substantial interests in the Gulf Coast, including Texas and Louisiana; the West, with the Rocky Mountains and Mid-Continent; the East and an expansion effort in Canada. For additional information, visit the Company’s Internet homepage at www.cabotog.com.
Forward-Looking Statements
The statements regarding future financial performance and results and the other statements which are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, market factors, the market price (including regional basis differentials) of natural gas and oil, results of future drilling and marketing activity, future production and costs, and other factors detailed in the Company’s Securities and Exchange Commission filings.
CABOT OIL & GAS RESULTS — Page 4
OPERATING DATA
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30,
| | | Nine-Months
Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2004
| |
| PRODUCED NATURAL GAS (Bcf) & OIL (MBbl) | | | | | | | | | | | | | | | | |
Natural Gas | | | | | | | | | | | | | | | | |
Gulf Coast | | | 8.4 | | | | 7.7 | | | | 23.6 | | | | 21.8 | |
West | | | 5.5 | | | | 5.9 | | | | 16.3 | | | | 18.0 | |
East | | | 5.0 | | | | 4.9 | | | | 14.3 | | | | 13.9 | |
Canada | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | |
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Total | | | 18.9 | | | | 18.5 | | | | 54.2 | | | | 53.7 | |
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Crude/Condensate | | | | | | | | | | | | | | | | |
Gulf Coast | | | 450 | | | | 683 | | | | 1,391 | | | | 2,027 | |
West | | | 37 | | | | 46 | | | | 120 | | | | 146 | |
East | | | 7 | | | | 7 | | | | 20 | | | | 20 | |
Canada | | | 1 | | | | 0 | | | | 1 | | | | 0 | |
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Total | | | 495 | | | | 736 | | | | 1,532 | | | | 2,193 | |
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Natural Gas Liquids | | | 1 | | | | 3 | | | | 10 | | | | 38 | |
Equivalent Production (Bcfe) | | | 21.9 | | | | 22.9 | | | | 63.5 | | | | 67.1 | |
| | | | |
| PRICES | | | | | | | | | | | | | | | | |
Average Produced Gas Sales Price ($/Mcf) | | | | | | | | | | | | | | | | |
Gulf Coast | | $ | 5.26 | | | $ | 4.68 | | | $ | 5.17 | | | $ | 4.83 | |
West | | $ | 4.68 | | | $ | 3.75 | | | $ | 4.72 | | | $ | 3.65 | |
East | | $ | 5.19 | | | $ | 5.24 | | | $ | 5.41 | | | $ | 5.17 | |
Canada | | $ | 4.39 | | | $ | 0.00 | | | $ | 4.39 | | | $ | 0.00 | |
Total | | $ | 5.07 | | | $ | 4.53 | | | $ | 5.10 | | | $ | 4.53 | |
Crude/Condensate Price ($/Bbl) | | | | | | | | | | | | | | | | |
Gulf Coast | | $ | 31.01 | | | $ | 28.32 | | | $ | 30.71 | | | $ | 29.50 | |
West | | $ | 42.85 | | | $ | 29.75 | | | $ | 38.06 | | | $ | 30.07 | |
East | | $ | 39.64 | | | $ | 28.02 | | | $ | 35.99 | | | $ | 28.67 | |
Canada | | $ | 36.63 | | | $ | 0.00 | | | $ | 36.63 | | | $ | 0.00 | |
Total | | $ | 32.03 | | | $ | 28.40 | | | $ | 31.36 | | | $ | 29.53 | |
| | | | |
| WELLS DRILLED | | | | | | | | | | | | | | | | |
Gross | | | 75 | | | | 55 | | | | 205 | | | | 123 | |
Net | | | 66 | | | | 44 | | | | 179 | | | | 99 | |
Gross Success Rate | | | 95 | % | | | 87 | % | | | 97 | % | | | 90 | % |
{CABOT OIL & GAS RESULTS — Page 5
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
| | | | | | | | | | | | | |
| | | Quarter Ended
September 30,
| | Nine-Months Ended
September 30,
| |
| | | 2004
| | 2003
| | 2004
| | 2003
| |
Net Operating Revenues | | | | | | | | | | | | | |
Natural Gas Production (1) | | $ | 96,111 | | $ | 84,555 | | $ | 276,518 | | $ | 242,841 | |
Brokered Natural Gas | | | 13,224 | | | 18,709 | | | 60,411 | | | 73,929 | |
Crude Oil and Condensate(1) | | | 8,514 | | | 21,455 | | | 34,833 | | | 65,098 | |
Other | | | 1,574 | | | 752 | | | 4,007 | | | 6,275 | |
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| | | | 119,423 | | | 125,471 | | | 375,769 | | | 388,143 | |
Operating Expenses | | | | | | | | | | | | | |
Brokered Natural Gas Cost | | | 11,627 | | | 16,602 | | | 53,944 | | | 66,402 | |
Direct Operations—Field and Pipeline | | | 13,297 | | | 11,271 | | | 38,489 | | | 36,022 | |
Exploration | | | 6,979 | | | 13,999 | | | 32,691 | | | 43,053 | |
Depreciation, Depletion and Amortization | | | 30,788 | | | 25,984 | | | 84,950 | | | 77,929 | |
Impairment of Long-Lived Assets | | | 3,458 | | | 5,870 | | | 3,458 | | | 93,796 | |
General and Administrative | | | 6,506 | | | 5,419 | | | 19,686 | | | 17,336 | |
Stock Compensation(2) | | | 2,495 | | | 383 | | | 5,613 | | | 1,233 | |
Taxes Other Than Income | | | 10,115 | | | 9,301 | | | 30,138 | | | 28,176 | |
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| | | | 85,265 | | | 88,829 | | | 268,969 | | | 363,947 | |
Gain on Sale of Assets | | | 120 | | | 6,988 | | | 7 | | | 7,593 | |
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Income from Operations | | | 34,278 | | | 43,630 | | | 106,807 | | | 31,789 | |
Interest Expense and Other | | | 5,577 | | | 6,972 | | | 16,399 | | | 18,549 | |
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Income Before Income Taxes | | | 28,701 | | | 36,658 | | | 90,408 | | | 13,240 | |
Income Tax Expense | | | 10,879 | | | 13,990 | | | 34,257 | | | 5,044 | |
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Net Income Before Cumulative Effect of Accounting Change | | | 17,822 | | | 22,668 | | | 56,151 | | | 8,196 | |
Cumulative Effect of Accounting Change(3) | | | — | | | — | | | — | | | (6,847 | ) |
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Net Income | | $ | 17,822 | | $ | 22,668 | | $ | 56,151 | | $ | 1,349 | |
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Net Earnings Per Share—Basic | | $ | 0.55 | | $ | 0.70 | | $ | 1.73 | | $ | 0.04 | |
Average Common Shares Outstanding | | | 32,548 | | | 32,179 | | | 32,491 | | | 32,000 | |
| (1) | See the "Impact of Mark-to-Market Accounting Requirements" table for additional information. |
| (2) | Includes the impact of the Company's performance share mark-to-market requirement and restricted stock amortization. |
| (3) | Cumulative effect of accounting change relates to the adoption of SFAS 143, "Accounting for Asset Retirement Obligations." |
CABOT OIL & GAS RESULTS—Page 6
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(in thousands)
| | | | | | |
| | | September 30,
2004
| | Dec. 31, 2003
|
Assets | | | | | | |
Current Assets | | $ | 184,151 | | $ | 143,331 |
Property, Equipment and Other Assets | | | 977,868 | | | 902,805 |
Deferred Income Taxes | | | 16,337 | | | 8,920 |
| | |
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Total Assets | | $ | 1,178,356 | | $ | 1,055,056 |
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Liabilities and Stockholders' Equity | | | | | | |
Current Liabilities | | $ | 198,235 | | $ | 156,527 |
Long-Term Debt | | | 270,000 | | | 270,000 |
Deferred Income Taxes | | | 232,127 | | | 208,955 |
Other Liabilities | | | 74,645 | | | 54,377 |
Stockholders' Equity | | | 403,349 | | | 365,197 |
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Total Liabilities and Stockholders' Equity | | $ | 1,178,356 | | $ | 1,055,056 |
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30,
| | | Nine-Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Cash Flows From Operating Activities | | | | | | | | | | | | | | | | |
Net Income | | $ | 17,822 | | | $ | 22,668 | | | $ | 56,151 | | | $ | 1,349 | |
Cumulative Effect of Accounting Change | | | — | | | | — | | | | — | | | | 6,847 | |
Change in Derivative Fair Value | | | 7,023 | | | | (1,218 | ) | | | 13,295 | | | | (24 | ) |
Impairment of Long-Lived Assets | | | 3,458 | | | | 5,870 | | | | 3,458 | | | | 93,796 | |
Income Charges Not Requiring Cash | | | 33,553 | | | | 26,544 | | | | 90,216 | | | | 78,821 | |
Gain on Sale of Assets | | | (120 | ) | | | (6,988 | ) | | | (7 | ) | | | (7,593 | ) |
Deferred Income Taxes | | | 8,268 | | | | 3,072 | | | | 15,449 | | | | (22,176 | ) |
Changes in Assets and Liabilities | | | (6,900 | ) | | | 1,955 | | | | 4,676 | | | | 11,633 | |
Exploration Expense | | | 6,979 | | | | 13,999 | | | | 32,691 | | | | 43,053 | |
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Net Cash Provided by Operations . | | | 70,083 | | | | 65,902 | | | | 215,929 | | | | 205,706 | |
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Cash Flows From Investing Activities | | | | | | | | | | | | | | | | |
Capital Expenditures | | | (55,317 | ) | | | (33,985 | ) | | | (157,747 | ) | | | (85,384 | ) |
Proceeds from Sale of Assets | | | 164 | | | | 15,821 | | | | 186 | | | | 18,181 | |
Restricted Cash | | | — | | | | (15,761 | ) | | | — | | | | (15,761 | ) |
Exploration Expense | | | (6,979 | ) | | | (13,999 | ) | | | (32,691 | ) | | | (43,053 | ) |
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Net Cash Used by Investing | | | (62,132 | ) | | | (47,924 | ) | | | (190,252 | ) | | | (126,017 | ) |
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Cash Flows From Financing Activities | | | | | | | | | | | | | | | | |
Sale of Common Stock Proceeds | | | 200 | | | | 3,393 | | | | 11,123 | | | | 5,851 | |
Decrease in Debt | | | — | | | | (19,000 | ) | | | — | | | | (80,000 | ) |
Purchase of Treasury Stock | | | (3,390 | ) | | | — | | | | (8,732 | ) | | | — | |
Dividends Paid | | | (1,304 | ) | | | (1,287 | ) | | | (3,906 | ) | | | (3,755 | ) |
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Net Cash Used by Financing | | | (4,494 | ) | | | (16,894 | ) | | | (1,515 | ) | | | (77,904 | ) |
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Net Increase in Cash and Cash Equivalents | | $ | 3,457 | | | $ | 1,084 | | | $ | 24,162 | | | $ | 1,785 | |
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| (*) | Net income plus non-cash charges and exploration. Excludes net proceeds on property sales. |
CABOT OIL & GAS RESULTS — Page 7
Selected Item Review and Reconciliation of Net Income and Earnings Per Share
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30,
| | | Nine-Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
As Reported—Net Income | | $ | 17,822 | | | $ | 22,668 | | | $ | 56,151 | | | $ | 1,349 | |
Reversal of Selected Items, Net of Tax: | | | | | | | | | | | | | | | | |
Impairment of Long-Lived Assets | | | 2,141 | | | | 3,634 | | | | 2,141 | | | | 58,060 | |
Gain on Sale of Assets | | | (74 | ) | | | (4,326 | ) | | | (4 | ) | | | (4,700 | ) |
Change in Derivative Fair Value | | | 4,347 | | | | (754 | ) | | | 8,230 | | | | (15 | ) |
Cumulative Effect of Accounting Change | | | — | | | | — | | | | — | | | | 6,847 | |
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Net Income Including Reversal of Selected Items | | $ | 24,236 | | | $ | 21,222 | | | $ | 66,518 | | | $ | 61,541 | |
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As Reported—Net Earnings Per Share | | $ | 0.55 | | | $ | 0.70 | | | $ | 1.73 | | | $ | 0.04 | |
Per Share Impact of Reversing Selected Items | | | 0.20 | | | | (0.04 | ) | | | 0.32 | | | | 1.88 | |
Net Earnings Per Share Including Reversal of Selected Items | | $ | 0.75 | | | $ | 0.66 | | | $ | 2.05 | | | $ | 1.92 | |
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Average Common Shares Outstanding | | | 32,548 | | | | 32,179 | | | | 32,491 | | | | 32,000 | |
Discretionary Cash Flow Calculation and Reconciliation
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30,
| | | Nine-Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Discretionary Cash Flow | | | | | | | | | | | | | | | | |
As Reported—Net Income | | $ | 17,822 | | | $ | 22,668 | | | $ | 56,151 | | | $ | 1,349 | |
Plus: | | | | | | | | | | | | | | | | |
Cumulative Effect of Accounting Change | | | — | | | | — | | | | — | | | | 6,847 | |
Change in Derivative Fair Value | | | 7,023 | | | | (1,218 | ) | | | 13,295 | | | | (24 | ) |
Impairment of Long-Lived Assets | | | 3,458 | | | | 5,870 | | | | 3,458 | | | | 93,796 | |
Income Charges Not Requiring Cash | | | 33,553 | | | | 26,544 | | | | 90,216 | | | | 78,821 | |
Gain on Sale of Assets | | | (120 | ) | | | (6,988 | ) | | | (7 | ) | | | (7,593 | ) |
Deferred Income Taxes | | | 8,268 | | | | 3,072 | | | | 15,449 | | | | (22,176 | ) |
Exploration Expense | | | 6,979 | | | | 13,999 | | | | 32,691 | | | | 43,053 | |
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Discretionary Cash Flow | | | 76,983 | | | | 63,947 | | | | 211,253 | | | | 194,073 | |
Plus: Changes in Assets and Liabilities | | | (6,900 | ) | | | 1,955 | | | | 4,676 | | | | 11,633 | |
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Net Cash Provided by Operations | | $ | 70,083 | | | $ | 65,902 | | | $ | 215,929 | | | $ | 205,706 | |
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CABOT OIL & GAS RESULTS — Page 8
Impact of Mark-to-Market Accounting Requirements
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30,
| | | Nine-Months Ended September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Unrealized Gain (Loss) on Derivatives(1) | | | | | | | | | | | | | | | | |
Natural Gas | | $ | 349 | | | $ | 676 | | | $ | (69 | ) | | $ | (324 | ) |
Crude Oil | | | (7,372 | ) | | | 542 | | | | (13,225 | ) | | | 348 | |
Incentive Stock Compensation Expense(2) | | | | | | | | | | | | | | | | |
Performance Shares | | | (1,378 | ) | | | — | | | | (3,158 | ) | | | — | |
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Mark-to-Market Impact, Before Income Tax | | $ | (8,401 | ) | | $ | 1,218 | | | $ | (16,452 | ) | | $ | 24 | |
Mark-to-Market Impact, Income Tax | | | 3,201 | | | | (464 | ) | | | 6,268 | | | | (9 | ) |
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Mark-to-Market Impact on Net Income | | $ | (5,200 | ) | | $ | 754 | | | $ | (10,184 | ) | | $ | 15 | |
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| (1) | These amounts represent the ineffective gain (loss) associated with the mark-to-market valuation of open positions. These amounts are reflected in the respective line items of Net Operating Revenues. Therefore, the computation of our reported realized commodity prices can be obtained by adding (subtracting) the loss (gain) from the respective Net Operating Revenues line item and dividing by reported production. |
| (2) | This amount relates to the mark-to-market valuation of the Company's performance share incentive stock compensation awards that is reflected in general and administrative expense. At September 30, 2004 the Company recognized stock compensation expense based on Cabot's ranking against a predetermined peer group based on total shareholder return. Cabot must calculate its liability at the balance sheet date under the assumption that its relative ranking remains constant throughout the measurement period (January 1, 2004 - December 31, 2006), creating an assumed ultimate liability which is then amortized over the measurement period (percent payout multiplied by shares multiplied by stock price at reported balance sheet date multiplied by the pro-rata time expired in the measurement period). Expense recognition will fluctuate between reporting periods due to the valuation of the performance shares at the reported balance sheet date. |
