CABOT OIL & GAS ANNOUNCES FULL YEAR AND FOURTH QUARTER RESULTS
STRONG GAS PRICES, HEDGE POSITIONS AND INCREASED PRODUCTION
DRIVE PROFITS FOR YEAR
HOUSTON, January 24, 2002 - Cabot Oil & Gas Corporation (NYSE:COG) today
announced 2001 net income available to common shareholders of $56.7 million, or
$1.87 per share, and discretionary cash flow of $231.2 million, or $7.64 per
share, before taking into account certain selected items related to non-cash
impairments of oil and gas properties, credit exposure to Enron Corp., a
severance tax refund and unrealized gains on derivative instruments. (See the
table below the Condensed Consolidated Statement of Operations for the after-tax
amounts associated with all reported selected items.) After these selected
items, reported earnings are $51.8 million, or $1.71 per share, and
discretionary cash flow is $230.5 million, or $7.61 per share.
These results surpass the 2000 net income available to common shareholders
of $30.2 million, or $1.10 per share, and the discretionary cash flow of $125.0
million, or $4.56 per share, excluding the impact of selected items.
Taken as a whole, Cabot experienced an unprecedented year. This is due to
several factors, namely a 21% increase in production volumes year-over-year, the
strength of realized natural gas prices and the Company's favorable hedge
positions in effect from February through October.
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"The most important of these is the production increase, in particular the
12% increase through the drillbit resulting from our exploration program,"
stated Ray Seegmiller, Chairman and Chief Executive Officer. "This is the first
time in our history that the Company has delivered double-digit, organic
production growth reinforcing the early success of our exploration efforts."
PRODUCTION
For the year Cabot's equivalent production totaled 81.1 Bcfe, including 6.2
Bcfe of production related to the Cody acquisition. This compares to 66.9 Bcfe
produced in 2000. The Company reported fourth quarter 2001 production of 23.3
Bcfe versus 17.4 Bcfe (a 34% increase) in the comparable quarter last year.
Analyzing the fourth quarter, after removing the 3.4 Bcfe associated with the
Cody acquisition, production would have increased 14% over last year's
comparable period. Sequentially, third quarter to fourth quarter of 2001,
production increased 5% nearly all of which reflects a full three months of Cody
production versus two months in the prior quarter.
PRICING
In 2001, the Company's average realized natural gas price was $4.36 per Mcf
compared to an average realization of $3.19 per Mcf in 2000. Of the $1.17 per
Mcf increase in realized prices, $.49 per Mcf relates to the incremental value
realized from Cabot's hedge position. Oil prices dropped nearly $2.00 per barrel
from 2000 to an average of $24.91 in 2001.
Cabot realized an average natural gas price for the fourth quarter of $2.87
per Mcf, 37% lower than the prior year. Oil price comparisons for the fourth
quarter reflected the same trend with the average realized price per barrel down
32% to $20.47 per barrel in
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2001. "We have once again entered a downturn in the energy price cycle," stated
Seegmiller. "To provide some level of protection going into 2002, we have taken
a defensive posture and entered into collar agreements covering approximately
60% of our anticipated natural gas production for the first four months of the
year. These hedges provide us price protection at $2.50 per Mmbtu on a NYMEX
equivalent basis for the early months of our 2002 budget," commented Seegmiller.
OTHER ITEMS
Exploration expense for 2001 was $63.5 million compared to $19.9 million in
2000. "This increase relates to an expanded overall level of drilling activity
which included 27 exploration wells in 2001 compared to 17 wells in 2000," said
Seegmiller. In 2001, Cabot incurred $30.2 million in dry hole expense and $20.6
million in seismic costs, of which $8.9 million and $11.6 million, respectively,
related to the fourth quarter (this was discussed in the January 22, 2002, press
release).
General and Administrative expense of $25.7 million for 2001 was $5.2
million higher year-over-year. This increase includes $1.2 million of transition
costs associated with the assimilation of Cody Company, nearly all of which was
completed by year-end. The remaining increase relates primarily to increases for
incentive compensation programs totaling $1.4 million, along with increases in
salaries and benefits of $1.0 million. These incremental expenses primarily
relate to efforts early in the year to retain employees due to the intense
competition for professional talent and the incremental personnel requirements
resulting from the Cody acquisition. Fourth quarter expenses were up over the
prior year for the same reasons.
As previously announced, Cabot has taken a $2.3 million charge to bad debt
in the fourth quarter. This amount relates to the Enron bankruptcy and
approximates our initial estimate.
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FOURTH QUARTER
Because of the higher reported exploration expense and lower commodity
prices, Cabot reported a fourth quarter loss of $5.9 million, or $.19 per share,
and discretionary cash flow of $35.3 million, or $1.12 per share. This reported
figure is after removing the impact of certain selected items including non-cash
impairments of oil and gas properties, credit exposure to Enron and unrealized
gains on derivative instruments. For the fourth quarter of 2000, Cabot reported
net income of $18.7 million, or $.64 per share, and discretionary cash flow of
$52.5 million, or $1.81 per share, excluding the impact of selected items.
After the selected items in 2001, the fourth quarter reported net loss was $10.8
million, or $.34 per share, and discretionary cash flow was $33.9 million, or
$1.07 per share.
RESERVES
Cabot presently is in the final stages of its year-end reserve audit. The
Company will release the details of this audit by mid February. At this time,
total proved reserves are estimated between 1,140 and 1,165 Bcfe, up from the
1,019 Bcfe at the end of 2000. The increase is due primarily to the Cody
acquisition, which combined with the drillbit is expected to replace production
by in excess of 250%. Finding costs for the year will be higher than last year
due to increased drilling costs, the Cody acquisition, extensive investments in
seismic and leasehold expected to benefit future years, along with an increase
in dry hole expense.
OUTLOOK
"What a difference 12 months make," said Seegmiller. "The industry is once
again dealing with extremes. We still feel the long-term fundamentals of the
natural gas market are strong. However, with the current soft market, a recovery
in commodity prices during
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the second half of the year is only a remote possibility; thus, Cabot has scaled
back its drilling program but will still be testing 19 new exploration
prospects." Seegmiller added, "It is anticipated there will be numerous
acquisition opportunities at reasonable prices during this low price environment
and we would consider reducing our drilling program to fund a good reserve
acquisition with upside potential. However, we do not intend to over extend the
Company's balance sheet. We believe the energy market will self correct as it
has every time and those who have a long term view will benefit."
Listen in live to Cabot Oil & Gas Corporation's full year and fourth
quarter earnings discussion with financial analysts on Friday, January 25, 2002,
at 9:30 AM EST at www.cabotog.com. A teleconference replay is also available at
(800) 633-8284, reservation number 20204109. The audio webcast and
teleconference replay will be available from January 25 at 11:30 AM EST until
February 1, 2002, at 5 PM EST.
Cabot Oil & Gas Corporation, headquartered in Houston, Texas, is a leading
domestic independent natural gas producer and marketer with substantial
interests in the onshore Texas and Louisiana Gulf Coast, Rocky Mountains,
Appalachia and Mid-Continent. For additional information, visit the Company's
internet homepage at www.cabotog.com.
* * *
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.
# # #
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CABOT OIL & GAS RESULTS -- PAGE 6
- ---------------------------------
OPERATING DATA
Quarter Ended Year Ended
December 31, December 31,
---------------- ---------------
2001 2000 2001 2000
---- ---- ---- ----
NATURAL GAS (Bcf) & OIL (MBbl)
Produced Natural Gas
Appalachia 4.5 4.3 17.4 17.8
West 6.8 7.0 26.2 29.0
Gulf Coast 8.3 4.2 25.6 14.1
------ ------ ------ ------
Total 19.6 15.5 69.2 60.9
Crude/Condensate 601 297 1,908 953
Natural Gas Liquids 14 19 88 37
Equivalent Production (Bcfe) 23.3 17.4 81.1 66.9
PRICES
Average Produced Gas Sales Price ($/Mcf)
Appalachia $ 3.58 $ 4.62 $ 4.96 $ 3.24
West $ 2.31 $ 4.08 $ 3.88 $ 2.86
Gulf Coast $ 2.92 $ 5.41 $ 4.44 $ 3.79
Total $ 2.87 $ 4.58 $ 4.36 $ 3.19
Crude/Condensate Price ($/Bbl) $20.47 $30.23 $24.91 $26.81
WELLS DRILLED
Gross 51 44 205 129
Net 32.7 30.3 152.6 91.6
Gross Success Rate 88% 82% 88% 86%
CABOT OIL & GAS RESULTS -- PAGE 7
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Amounts)
Quarter Ended Year Ended
December 31, December 31,
----------------------- ------------------------
2001 2000 2001 2000
--------- ---------- --------- ----------
NET OPERATING REVENUES
Natural Gas Production $ 56,166 $ 71,097 $ 301,529 $ 194,185
Crude Oil and Condensate 12,312 8,976 47,544 25,544
Brokered Natural Gas 9,568 34,354 90,710 141,085
Change in Derivative Fair Value (647) 0 142 0
Other 2,919 420 7,117 7,837
-------- ---------- --------- ----------
80,318 114,847 447,042 368,651
OPERATING EXPENSES
Brokered Natural Gas Cost 8,835 32,750 87,785 135,700
Production and Pipeline Operations 11,602 9,436 41,217 35,727
Exploration 23,699 7,771 63,454 19,858
Taxes Other Than Income 7,177 7,470 28,341 23,041
Administrative 7,492 4,886 25,650 20,421
Bad Debt 2,270 2,096 2,270 2,096
Depreciation, Depletion and Amortization 28,421 16,595 88,422 57,809
Impairment of Long-Lived Assets 5,131 0 6,852 9,143
-------- ---------- --------- ----------
94,627 81,004 343,991 303,795
Gain (Loss) on Sale of Assets 284 (17) 26 (39)
-------- ---------- --------- ----------
INCOME (LOSS) FROM OPERATIONS (14,025) 33,826 103,077 64,817
Minority Interest in Subsidiaries (10) 0 4 0
Interest Expense 6,278 5,834 20,813 22,878
-------- ---------- --------- ----------
Income (Loss) Before Income Taxes (20,293) 27,992 82,260 41,939
Income Tax Expense (Benefit) (9,454) 10,920 30,413 16,467
-------- ---------- --------- ----------
NET INCOME (LOSS) (10,839) 17,072 51,847 25,472
Dividend Requirement on Preferred Stock 0 0 0 (3,749)
-------- ---------- --------- ----------
NET INCOME (LOSS) APPLICABLE TO COMMON $(10,839) $ 17,072 $ 51,847 $ 29,221
======== ========== ========= ==========
NET INCOME (LOSS) PER COMMON SHARE - BASIC $ (0.34) $ 0.59 $ 1.71 $ 1.07
======== ========== ========= ==========
Average Common Shares Outstanding 31,602 29,032 30,276 27,384
RESULTS FROM RECURRING OPERATIONS
As Reported - Net Income (Loss)
Applicable to Common $(10,839) $ 17,072 $ 51,847 $ 29,221
After-Tax Impact for Selected Items:
Change in Derivative Fair Value (397) 87
Impairment of Long-Lived Assets (3,145) (4,200) (5,605)
Negative Dividend - Preferred
Stock Repurchase 5,100
Bad Debt Expense (1,392) (1,285) (1,392) (1,285)
Severance Tax Refund 695
Severance Costs (582)
Benefit from Contract Settlement (306) 1,432
-------- ---------- --------- ----------
Net Income (Loss) from Recurring Operations $ (5,905) $ 18,663 $ 56,657 $ 30,161
======== ========== ========= ==========
Net Income (Loss) per Common Share $ (0.19) $ 0.64 $ 1.87 $ 1.10
======== ========== ========= ==========
Discretionary Cash Flow (DCF) $ 35,292 $ 52,488 $ 231,205 $ 124,990
======== ========== ========= ==========
DCF per Common Share $ 1.12 $ 1.81 $ 7.64 $ 4.56
======== ========== ========= ==========
CABOT OIL & GAS RESULTS -- PAGE 8
- ---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In Thousands)
Dec. 31, Dec. 31,
2001 2000
-------- --------
ASSETS
Current Assets $ 88,455 $ 110,269
Property, Equipment and Other Assets 988,287 625,365
---------- ----------
Total Assets $1,076,742 $ 735,634
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 110,239 $ 118,108
Long-Term Debt 393,000 253,000
Deferred Income Taxes 203,808 108,174
Other Liabilities 18,380 13,847
Stockholders' Equity 351,315 242,505
---------- ----------
Total Liabilities and Stockholders' Equity $1,076,742 $ 735,634
========== ==========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In Thousands)
Quarter Ended Year Ended
Dec. 31, Dec. 31,
------------------ ------------------
2001 2000 2001 2000
---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (10,839) $ 17,072 $ 51,847 $ 25,472
Income Charges Not Requiring Cash 34,874 16,657 98,126 68,091
(Gain) Loss on Sale of Assets (284) 17 (26) 39
Deferred Income Taxes (13,550) 8,988 17,106 13,163
Changes in Assets and Liabilities 1,737 (5,330) 19,928 (7,613)
Exploration Expense 23,699 7,771 63,454 19,858
---------- ---------- --------- ----------
Net Cash Provided by Operations 35,637 45,175 250,435 119,010
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (*) (45,831) (27,685) (322,625) (99,359)
Proceeds from Sale of Assets 931 487 6,829 3,150
Exploration Expense (23,699) (7,771) (63,454) (19,858)
---------- ---------- --------- ----------
Net Cash Used by Investing (68,599) (34,969) (379,250) (116,067)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common Stock 0 3,507 7,748 85,104
Retirement of Preferred Stock 0 0 0 (51,600)
Increase (Decrease) in Debt 26,000 (7,000) 124,000 (24,000)
Preferred Dividends 0 0 0 (2,202)
Common Dividends (1,264) (1,161) (4,801) (4,350)
---------- ---------- --------- ----------
Net Cash Provided (Used) by Financing 24,736 (4,654) 126,947 2,952
Net Increase (Decrease) in Cash and
Cash Equivalents $ (8,226) $ 5,552 $ (1,868) $ 5,895
========== ========== ========= ==========
DISCRETIONARY CASH FLOW (**) $ 33,900 $ 50,505 $ 230,507 $ 124,421
========== ========== ========= ==========
(*) Excludes the non-cash consideration of $49.9 million in common stock issued
in connection with the acquisition of Cody Company in August 2001.
(**) Net income plus non-cash charges and exploration less preferred dividends.
Excludes net proceeds on property sales.