EXHIBIT 99.1
| FOR RELEASE | FOR MORE INFORMATION CONTACT | |
| October 27, 2005 | Scott Schroeder (281) 589-4993 |
CABOT OIL & GAS REPORTS FINANCIAL RESULTS
Key highlights include:
Record third quarter and nine-month net income and discretionary cash flows, along with increased natural gas production in year-to-date comparable periods.
HOUSTON, October 27, 2005—Cabot Oil & Gas Corporation (NYSE: COG) today announced third quarter net income of $33.8 million, or $0.69 per share, nearly double the $17.8 million, or $0.37 per share, reported in last year’s third quarter. At the same time, discretionary cash flows also reached new highs, rising to $92.9 million this year versus $77.0 million last year (see attached reconciliation for details). “Unprecedented commodity prices drove these record level financial results for the quarter,” said Dan O. Dinges, Chairman, President and CEO. Cash flow from operations for the quarter declined to $59.0 million, compared to $70.1 million in the comparable quarter last year, due to changes in working capital.
Compared to last year’s third quarter, the Company experienced a 34 percent increase in realized natural gas prices and a 44 percent increase in oil prices. Natural gas price realizations were $6.77 per Mcf for the quarter compared to $5.07 per Mcf last year. The quarterly oil price comparison was $46.05 per barrel in 2005 versus $32.03 per barrel in 2004. “In addition to the increase in price realizations, I am very pleased with the improved production profiles coming from our East, West and Canadian portfolios. The progress with the drill bit in those regions somewhat offset the production deferrals we have experienced in the Gulf Coast region as a result of the recent hurricanes,” added Dinges. Production for the quarter was 20.5 Bcfe versus the 21.9 Bcfe recorded from the third quarter of 2004. “The quarterly shortfall includes the hurricane impacts that deferred nearly 1.0 Bcfe of production in the Gulf Coast region,” commented Dinges.
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In terms of quarterly expense comparison, operating expenses grew about 20% with the largest increase coming from an increase in dry hole expense. Also contributing were higher “Taxes Other Than Income” due to the increased price realizations and brokered natural gas cost. “Additionally, stock compensation expense has grown as we have become more aggressive in our retention efforts at all levels in the organization to attract and retain talented individuals,” stated Dinges. “The industry experienced many years of lackluster performance and many people left the industry. Talented people are critical for future success.”
Year-to-Date
For the nine months ended September 2005, Cabot reported net income of $89.9 million, or $1.84 per share, versus $56.2 million, or $1.15 per share, for the first nine months of 2004. “This level of net income exceeds the full-year net income figure reported for 2004,” commented Dinges. Also setting new benchmarks for the nine months were cash flow from operations of $247.1 million and discretionary cash flow of $255.2 million. Last year’s nine-month figures were $215.9 million and $211.3 million, respectively.
Higher realized commodity prices provided the improvement in revenues, assisted by increased natural gas production year-to-date. The overall production profile, however, was down less than one percent, with the decline entirely attributable to the hurricane deferrals. Increased expenses offset part of the revenue pickup, with the largest increases occurring in exploration, DD&A, direct operations, and other taxes.
In terms of the balance sheet, the Company ended the quarter with a $10 million increase in debt, which together with existing cash was used to fund approximately $60 million in property acquisitions that were discussed in the October 12, 2005 operational press release. Also the current liability level grew primarily due to the mark-to-market for outstanding derivative instruments.
For both 2005 reporting periods (the quarter and year-to-date) there were no material selected items. However, the comparable 2004 periods were impacted by certain items, which are highlighted in the Selected Item Review and Reconciliation of Net Income and Earnings Per Share table included with this release.
“The strength of the production growth coming from the East, West and to a lesser extent Canada, highlights the impact of our transition toward resource type plays within our portfolio,” explained Dinges. “With a plan for 2006 that includes further expansion of these efforts and more resource drilling in our Gulf Coast operation, look for 5 to 10 percent organic production growth in 2006.”
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Conference Call
Listen in live to Cabot Oil & Gas Corporation’s 2005 third quarter financial and operating results discussion with financial analysts on Friday, October 28, 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), pass code #1308115. A replay will be available from Friday, October 28, through Friday, November 4, 2005. The latest financial guidance, including the Company’s hedge positions, along with a replay of the web cast, which will be archived for one year, are available in the investor relations section of the Company’s website atwww.cabotog.com.
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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, including the Rocky Mountains and Mid-Continent; the East, and Canada. For additional information, visit the Company’s Internet homepage atwww.cabotog.com.
Forward-Looking Statements
The statements regarding future financial performance and results, production growth, 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.
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CABOT OIL & GAS RESULTS — Page 4
OPERATING DATA
| Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
PRODUCED NATURAL GAS (Bcf) & OIL (MBbl) | ||||||||||||||||
Natural Gas | ||||||||||||||||
Gulf Coast | 6.3 | 8.4 | 21.0 | 23.6 | ||||||||||||
West | 5.9 | 5.5 | 17.3 | 16.3 | ||||||||||||
East | 5.5 | 5.0 | 15.7 | 14.3 | ||||||||||||
Canada | 0.3 | — | 0.8 | — | ||||||||||||
Total | 18.0 | 18.9 | 54.8 | 54.2 | ||||||||||||
Crude/Condensate/Ngl | ||||||||||||||||
Gulf Coast | 364 | 450 | 1,191 | 1,399 | ||||||||||||
West | 45 | 38 | 127 | 122 | ||||||||||||
East | 7 | 7 | 20 | 20 | ||||||||||||
Canada | 5 | 1 | 14 | 1 | ||||||||||||
Total | 421 | 496 | 1,352 | 1,542 | ||||||||||||
Equivalent Production (Bcfe) | 20.5 | 21.9 | 62.9 | 63.5 | ||||||||||||
PRICES | ||||||||||||||||
Average Produced Gas Sales Price ($/Mcf) | ||||||||||||||||
Gulf Coast | $ | 6.67 | $ | 5.26 | $ | 6.26 | $ | 5.17 | ||||||||
West | $ | 5.91 | $ | 4.68 | $ | 5.38 | $ | 4.72 | ||||||||
East | $ | 7.75 | $ | 5.19 | $ | 6.90 | $ | 5.41 | ||||||||
Canada | $ | 8.04 | $ | 4.39 | $ | 5.95 | $ | 4.39 | ||||||||
Total | $ | 6.77 | $ | 5.07 | $ | 6.16 | $ | 5.10 | ||||||||
Crude/Condensate Price ($/Bbl) | ||||||||||||||||
Gulf Coast | $ | 43.93 | $ | 31.01 | $ | 42.72 | $ | 30.71 | ||||||||
West | $ | 60.77 | $ | 42.85 | $ | 54.21 | $ | 38.06 | ||||||||
East | $ | 59.22 | $ | 39.64 | $ | 52.98 | $ | 35.99 | ||||||||
Canada | $ | 52.94 | $ | 36.63 | $ | 42.23 | $ | 36.63 | ||||||||
Total | $ | 46.05 | $ | 32.03 | $ | 43.92 | $ | 31.36 | ||||||||
WELLS DRILLED | ||||||||||||||||
Gross | 88 | 75 | 229 | 205 | ||||||||||||
Net | 72 | 66 | 177 | 179 | ||||||||||||
Gross Success Rate | 97 | % | 95 | % | 95 | % | 97 | % | ||||||||
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, | |||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||
Operating Revenues | ||||||||||||
Natural Gas Production(1) | $ | 121,477 | $ | 96,111 | $ | 337,566 | $ | 276,518 | ||||
Brokered Natural Gas | 18,756 | 13,224 | 60,768 | 60,411 | ||||||||
Crude Oil and Condensate(1) | 21,336 | 8,514 | 57,250 | 34,833 | ||||||||
Other | 188 | 1,574 | 2,131 | 4,007 | ||||||||
| 161,757 | 119,423 | 457,715 | 375,769 | |||||||||
Operating Expenses | ||||||||||||
Brokered Natural Gas Cost | 16,550 | 11,627 | 53,549 | 53,944 | ||||||||
Direct Operations—Field and Pipeline | 14,246 | 13,297 | 43,171 | 38,489 | ||||||||
Exploration | 16,665 | 6,979 | 47,396 | 32,691 | ||||||||
Depreciation, Depletion and Amortization | 30,670 | 30,788 | 90,492 | 84,950 | ||||||||
Impairment of Oil & Gas Properties | — | 3,458 | — | 3,458 | ||||||||
General and Administrative (excluding Stock-based Compensation) | 5,417 | 6,506 | 20,510 | 19,686 | ||||||||
Stock-based Compensation(2) | 4,262 | 2,495 | 6,829 | 5,613 | ||||||||
Taxes Other Than Income | 14,939 | 10,115 | 37,053 | 30,138 | ||||||||
| 102,749 | 85,265 | 299,000 | 268,969 | |||||||||
Gain on Sale of Assets | 15 | 120 | 74 | 7 | ||||||||
Income from Operations | 59,023 | 34,278 | 158,789 | 106,807 | ||||||||
Interest Expense and Other | 5,339 | 5,577 | 15,461 | 16,399 | ||||||||
Income Before Income Taxes | 53,684 | 28,701 | 143,328 | 90,408 | ||||||||
Income Tax Expense | 19,928 | 10,879 | 53,388 | 34,257 | ||||||||
Net Income | $ | 33,756 | $ | 17,822 | $ | 89,940 | $ | 56,151 | ||||
Net Earnings Per Share—Basic(3) | $ | 0.69 | $ | 0.37 | $ | 1.84 | $ | 1.15 | ||||
Average Common Shares Outstanding(3) | 48,951 | 48,822 | 48,865 | 48,736 | ||||||||
| (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) | Reflects the 3-for-2 split of the Company's Common Stock on March 31, 2005. |
CABOT OIL & GAS RESULTS — Page 6
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands)
| September 30, 2005 | December 31, 2004 | |||||
Assets | ||||||
Current Assets | $ | 232,180 | $ | 194,679 | ||
Property, Equipment and Other Assets | 1,164,143 | 1,001,422 | ||||
Deferred Income Taxes | 19,601 | 14,855 | ||||
Total Assets | $ | 1,415,924 | $ | 1,210,956 | ||
Liabilities and Stockholders' Equity | ||||||
Current Liabilities | $ | 309,628 | $ | 196,889 | ||
Long-Term Debt | 260,000 | 250,000 | ||||
Deferred Income Taxes | 269,410 | 247,376 | ||||
Other Liabilities | 74,629 | 61,029 | ||||
Stockholders' Equity | 502,257 | 455,662 | ||||
Total Liabilities and Stockholders' Equity | $ | 1,415,924 | $ | 1,210,956 | ||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands)
| Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||
Net Income | $ | 33,756 | $ | 17,822 | $ | 89,940 | $ | 56,151 | ||||||||
Change in Derivative Fair Value | (1,630 | ) | 7,023 | 2,051 | 13,295 | |||||||||||
Impairment of Oil & Gas Properties | — | 3,458 | — | 3,458 | ||||||||||||
Income Charges Not Requiring Cash | 34,977 | 33,553 | 97,646 | 90,216 | ||||||||||||
Gain on Sale of Assets | (15 | ) | (120 | ) | (74 | ) | (7 | ) | ||||||||
Deferred Income Tax Expense | 9,147 | 8,268 | 18,225 | 15,449 | ||||||||||||
Changes in Assets and Liabilities | (33,865 | ) | (6,900 | ) | (8,073 | ) | 4,676 | |||||||||
Exploration Expense | 16,665 | 6,979 | 47,396 | 32,691 | ||||||||||||
Net Cash Provided by Operations | 59,035 | 70,083 | 247,111 | 215,929 | ||||||||||||
Cash Flows From Investing Activities | ||||||||||||||||
Capital Expenditures | (125,656 | ) | (55,317 | ) | (241,504 | ) | (157,747 | ) | ||||||||
Proceeds from Sale of Assets | 286 | 164 | 996 | 186 | ||||||||||||
Exploration Expense | (16,665 | ) | (6,979 | ) | (47,396 | ) | (32,691 | ) | ||||||||
Net Cash Used by Investing | (142,035 | ) | (62,132 | ) | (287,904 | ) | (190,252 | ) | ||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Sale of Common Stock Proceeds | 508 | 200 | 4,088 | 11,123 | ||||||||||||
Net Increase in Debt | 10,000 | — | 10,000 | — | ||||||||||||
Increase in Book Overdrafts | 25,691 | — | 25,691 | — | ||||||||||||
Purchase of Treasury Stock | — | (3,390 | ) | (571 | ) | (8,732 | ) | |||||||||
Dividends Paid | (1,958 | ) | (1,304 | ) | (5,254 | ) | (3,906 | ) | ||||||||
Net Cash Provided / (Used) by Financing | 34,241 | (4,494 | ) | 33,954 | (1,515 | ) | ||||||||||
Net (Decrease) / Increase in Cash and | ||||||||||||||||
Cash Equivalents | $ | (48,759 | ) | $ | 3,457 | $ | (6,839 | ) | $ | 24,162 | ||||||
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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, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
As Reported—Net Income | $ | 33,756 | $ | 17,822 | $ | 89,940 | $ | 56,151 | ||||||||
Reversal of Selected Items, Net of Tax: | ||||||||||||||||
Impairment of Oil & Gas Properties | — | 2,141 | — | 2,141 | ||||||||||||
Gain on Sale of Assets | (10 | ) | (74 | ) | (46 | ) | (4 | ) | ||||||||
Change in Derivative Fair Value | (1,012 | ) | 4,347 | 1,265 | 8,230 | |||||||||||
Net Income Including Reversal of Selected Items | $ | 32,734 | $ | 24,236 | $ | 91,159 | $ | 66,518 | ||||||||
As Reported—Net Earnings Per Share | $ | 0.69 | $ | 0.37 | $ | 1.84 | $ | 1.15 | ||||||||
Per Share Impact of Reversing Selected Items | (0.02 | ) | 0.13 | 0.03 | 0.21 | |||||||||||
Net Earnings Per Share Including Reversal of Selected Items | $ | 0.67 | $ | 0.50 | $ | 1.87 | $ | 1.36 | ||||||||
Average Common Shares Outstanding | 48,951 | 48,822 | 48,865 | 48,736 | ||||||||||||
Discretionary Cash Flow Calculation and Reconciliation
(In thousands)
| Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Discretionary Cash Flow | ||||||||||||||||
As Reported—Net Income | $ | 33,756 | $ | 17,822 | $ | 89,940 | $ | 56,151 | ||||||||
Plus: | ||||||||||||||||
Change in Derivative Fair Value | (1,630 | ) | 7,023 | 2,051 | 13,295 | |||||||||||
Impairment of Oil & Gas Properties | — | 3,458 | — | 3,458 | ||||||||||||
Income Charges Not Requiring Cash | 34,977 | 33,553 | 97,646 | 90,216 | ||||||||||||
Gain on Sale of Assets | (15 | ) | (120 | ) | (74 | ) | (7 | ) | ||||||||
Deferred Income Tax Expense | 9,147 | 8,268 | 18,225 | 15,449 | ||||||||||||
Exploration Expense | 16,665 | 6,979 | 47,396 | 32,691 | ||||||||||||
Discretionary Cash Flow | 92,900 | 76,983 | 255,184 | 211,253 | ||||||||||||
Plus: Changes in Assets and Liabilities | (33,865 | ) | (6,900 | ) | (8,073 | ) | 4,676 | |||||||||
Net Cash Provided by Operations | $ | 59,035 | $ | 70,083 | $ | 247,111 | $ | 215,929 | ||||||||
Net Debt Reconciliation
(In thousands)
| September 30, 2005 | December 31, 2004 | |||||||
Current Portion of Long-Term Debt | $ | 20,000 | $ | 20,000 | ||||
Long-Term Debt | 260,000 | 250,000 | ||||||
Total Debt | $ | 280,000 | $ | 270,000 | ||||
Stockholders' Equity | 502,257 | 455,662 | ||||||
Total Capitalization | $ | 782,257 | $ | 725,662 | ||||
Total Debt | $ | 280,000 | $ | 270,000 | ||||
Less: Cash and Cash Equivalents | (3,187 | ) | (10,026 | ) | ||||
Net Debt | $ | 276,813 | $ | 259,974 | ||||
Net Debt | $ | 276,813 | $ | 259,974 | ||||
Stockholders' Equity | 502,257 | 455,662 | ||||||
Total Adjusted Capitalization | $ | 779,070 | $ | 715,636 | ||||
Total Debt to Total Capitalization Ratio | 35.8 | % | 37.2 | % | ||||
Less: Impact of Cash and Cash Equivalents | 0.3 | % | 0.9 | % | ||||
Net Debt to Adjusted Capitalization Ratio | 35.5 | % | 36.3 | % | ||||
CABOT OIL & GAS RESULTS — Page 8
Impact of Mark-to-Market Accounting Requirements
(In thousands)
| Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Unrealized Gain / (Loss) on Derivatives(1) | ||||||||||||||||
Natural Gas | $ | (408 | ) | $ | 349 | $ | (186 | ) | $ | (69 | ) | |||||
Crude Oil | 2,038 | (7,372 | ) | (1,865 | ) | (13,225 | ) | |||||||||
Incentive Stock Compensation Expense(2) | ||||||||||||||||
Performance Shares | (2,458 | ) | (1,378 | ) | (2,572 | ) | (3,158 | ) | ||||||||
Mark-to-Market Impact, Before Income Tax | $ | (828 | ) | $ | (8,401 | ) | $ | (4,623 | ) | $ | (16,452 | ) | ||||
Mark-to-Market Impact, Income Tax | 316 | 3,201 | 1,771 | 6,268 | ||||||||||||
Mark-to-Market Impact on Net Income | $ | (512 | ) | $ | (5,200 | ) | $ | (2,852 | ) | $ | (10,184 | ) | ||||
| (1) | These amounts represent the unrealized gain / (loss) associated with the mark-to-market valuation of open positions which do not qualify for hedge accounting or are ineffective. These amounts are reflected in the respective line items of Operating Revenues. Therefore, the computation of our reported realized commodity prices can be obtained by adding the loss from the respective 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, 2005 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, 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. |