COG - Earnings call transcript Q1 2020

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Operator

Good morning, and welcome to the Cabot Oil & Gas Corporation First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I'd now like to turn the conference over to Dan Dinges, Chairman, President and Chief Executive Officer. Please go ahead.

Dan Dinges

Good morning. us Cabot joining earnings quarter for call. you today first for XXXX Thank

into the the us those this performance like I the to want our Before get keep individuals those for who affected COVID-XX. that on pandemic. have thoughts to working thank been lines, to our during first workers are all have with especially safe who front by I health-care say I'd quarter, been

efforts our I our to to tireless all for Additionally, keep of running employees want efficiently. operations their thank

While never we do this of spirit navigating I are from through truly stronger. I bet the times, challenging and expect would re-emerge even resiliency us to against the period human

on we morning's call, reminder, statements will a based this current forward-looking As expectations. make on our

will and reference forward-looking earnings reconciliations comments measures, financial comparable as well yesterday's our other as the were financial statements most to directly release. measures GAAP non-GAAP of some in disclaimers provided Additionally,

quarter, free during We which even to challenging flow market. most cash of approximately X% per prior XX% returned yields $XX.X realized positive highlighting first despite a cash relative net currently basis. decrease the the shareholders our deliver approximately $XX.X generated annualized company's flow in to quarter of through ability XX% free the dividend, flow, period, profit of positive the free to and of and share prices income Cabot cash During $X.XX the year in or million million our an on

cover committed our free expected fully enough our to and to on XXXX, is fully program flow remain We year for dividend dividend. to cash NYMEX the based current our for futures generate

of net debt-to-trailing X.X ironclad remains times. months XX sheet with EBITDAX balance ratio Our

$X.X unanimously reaffirmed billion credit our base Our revolving borrowing lenders group under our recently facility.

end result on credit million the at our cash of of $XXX liquidity under in first the the at facility which balance remain commitments $X.X when quarter, over billion bank including of approximately billion, $X.X Aggregate sheet.

plan to of in portion a pay an of we year, of off position. debt our this million which tranche We maturing cash with $XX July have

was operational was guidance X.XXX line front, placed the quarter which were foot all the in range cubic during the first nine quarter. wells our February. during billion On for which the turned of We per our day, production production on quarter, for inside

are rigs completion and two currently We operating two crews. utilizing

times As disclosed, a production X.X we during This schedule production on the long during second the a with in laterals primarily turn-in-line large expect driven placed with the beginning between part previously for large in mid-May. months second decline sequential and year and XX a of year be to long lighter wells first during first only of expected is of pads the cycle the the result quarter, by quarters.

gas assumes Additionally, our during season. the shoulder modest price-related curtailments forecast natural

one that second remedial related on the the from completed pad levels reflects spending the to stages of first production capital in Our unplanned downtime work the on quarter large of to first to deferral quarter, resulted in which a lower the range second quarter. impact led guidance also well XXX quarter over

operational X.XXX previously levels billion midpoint range full-year foot year-over-year. day to range cubic to the cubic reflect X.XXX updated production our have production a flat billion changes. We this per feet implies mentioned guidance to of of The

capital reaffirmed program $XXX million. of our have we Additionally,

and our quarter the a to our production third on placing wells increase late year. be We of expected do production while and the significant quarter is expect levels of production fourth from approximately August on during with sequential two-thirds expectations flat quarter last mid-May fourth based between

pandemic. disruption to to additional in NYMEX XXXX potential rally the related this more hedges for summer use the for futures the global recent layer protect to the demand month We in against prolonged summer

almost $X.XX a prices later year-end with call XXXX drastically increasing $X.XX has improved Mmbtu. approximately in since XXXX year outlook the to this natural by into per February However, for our gas NYMEX and future

This levels and cuts activity the in XXXX reduction have XXXX has the the legacy in seen from been significant by substantial in basins Marcellus, and addition Mid-Continent, like are for we the Haynesville declines like activity seeing to Eagle declines and expectation expected supply in in gas Ford in oil gas gas Permian, driven producing in production. sizable the which basins result we to associated Utica, in significant were

for premature any to is point. disclose this It guidance formal XXXX at

return a would that approximately at employed of would year cash below capital one X% strip, deliver However, times and leverage maintenance a highlight yield while all free current program XX% ratio next EBITDA. the a I on over flow maintaining net a capital

we continue next for remain the natural today, we gas of XXXX unhedged to year. outlook assess as for As market

activity While believe for supplied that market. forward the optimism levels We market natural positive under underestimating extremely currently increase us. into the supply for in curve the XXXX curve XXXX is of under for gas us address incentivize potential the forward to recent increased that is entering move need to a higher providing the to market XXXX will

For NYMEX million and every reference, price cash $XX highlighting flow a flow of shareholders levels increased capital XXXX capital incremental cash result maintenance approximately year. in in the improvement annual in under scenario for opportunity expansion $X.XX returned free free the to next of significant

due free employed resulted flow through on we environment While return likely the to XXXX market tough capital winter. currently exiting price proved our oversupplied and year be a an will to lower last managing cash from are for a

Our outlook improved year, for - year markedly the is improved. of however, markedly next is

our acute control, on generating have disciplined remain capital spending returns, to increasing and continued our to returning out with proved cash financial focusing positive we objectives flow, capital strategic shareholders previously, laid with on our strength, financial focus base. plan the reserve including on free an cost delivering maintaining We demonstrating

than who stronger including before. period natural healthy believe we shareholders. the from in been like that current thoughts with outlook financially during difficult has extremely our given and markets to stress for again, are anyone emerge and Once employees time, XXXX. Cabot remains gas impacted this will our this We

I'm With questions. for happy up any it open that, to

Operator

with [Operator KeyBanc. Instructions] Leo Our come go ahead. from first Please question Mariani will

Dan Dinges

mute Leo. You're on

Operator

ahead go question. with please your Leo,

maybe line Your muted.

Okay.

go just the question. will We next to

question Harrison with Simmons Our from come will ahead. Please go Kashy Energy.

Kashy Harrison

face you price over should capital number let's wondering in I'm your medium know years, can more Dan, here. say - meaningfully event, gas think how [indiscernible] medium-term of the from price a about about growth just in rate you're but for think a we mid-cycle growth? how of physically in higher moves the pick that a should term, over we and and XXXX, what higher deliver the environment I level required to a just

Dan Dinges

looking look is has is been price a tailwind. getting on current may good program all our there Well, of it's XXXX and a the little a at our anticipation scenarios lot focus about efficient be at all industry And possibly we're step we as of dealing question. a as and We're if now, and with general, there And growth thinking that with. be. XXXX bit being back in right take you growth a out at and commenting our can look the that's just you carnage you

of have in or sheet balance replay a in low increase and increase. a have time both everybody in You have you jumped a and stress get little growth commodity you bit bad seems know, oil each in advantage you of that number of it's gas, price market, that, to it a take oversupplied tries price, you and

having for months comfortable sustainable changes that in for an make few versus and to issue growth. there's we trying feel increased is the it's us to would that. for some long-term the a We and spend a have fundamental decision capital of And would

over capital your bit You participate excess over stress there's still and and off a short recaptured has a all and back time, such little for hadn't for over in of it. our period again into that's and better you distress you pricing That rolls market. played and pricing been why put

XXX, XXXX, I like the go an a think you That's out sustainable not is what strip concern. get you in market. somewhere range. we into view that it's backwardated into an If market, look backwardation average, and as The for a somewhere get now, you of would at average a you such us can right into XXX,

story. And program market, With built - about a the Now our if felt growth had that our said, I that would in, participate comfortable is flexibility contracts, we side in contango that. service of through we has more and We've into of we a at up so. if kind our capital to few build to dispense do and we production if, to now elect right fact more chose given in stages XXXX, to levels. complete

is where Our today maintenance that of have kind maintenance capital the capital are. we rolling at comfortable we would of feel kind were we also. We forward

that is the be flow. has for free Our metrics focus this year of free our being focus our cash generating flow on years, going generating is and financial cash fifth to

the have to love has that We'd sheet with But companies to We'd our been it. the long, one of perceive the we sustainable way what claim in cautious we market one had the into few depressed change grow of - strip. we're time, to make that and our it. we're long and and that going not commodity the the And capital exposure. we're higher balance love historically

Kashy Harrison

color, great Dan. as some -- rally round. go this hope has Certainly, That's legs this But

Dan Dinges

[indiscernible].

Kashy Harrison

wondering that capital But I with to time. thoughts topic. guess I bit returns still I sticking general evolved a your same have it's little over if guess, then shareholders maybe was on may

at presentation or least a moving you Or dividend have do strategy to moving maybe return do buybacks have of a wanting a highlight, bias you more for know buyback still XX%. I the you But Specifically, in forward? special you forward?

Dan Dinges

even on bought there right at we've since - least we've got more XX% kind XXXX. what you or the of with shareholders the our And increased We've five returning returned XX% now in our back dividend Yeah. about so. times of to and shares. about line return XX% the past, And tag we

but the we an focused illustrate referenced back if So program. with and least program a as example, look what we metrics, at on historically, have we a for our feel you we're maintenance financial that good delivered back to shareholders. to going about deliver more We XX% can XXXX,

- of obviously, part priority, dividend the that most is considerations mix. then is important have near put going and to don't don't have for always operation have another a base certainly for we consideration for we kind obviously repayment but dividend debt growing much the Our of into that real - always we and currently is amount debt maintaining the us, large fall also in, a term and

give in But that of we and a us Then buybacks, dividend, commodity more been a comfortable capital price, use that. would then strip sustainable interested consideration. saw expected if the before would under dividend off we've capital is return for that bit If after little an would of maintaining a a - with opportunistic that we any and some strong disconnect. occur if that oversupplied capital commodity in would demand, roll not there in is always growth layering we market the allow into the a felt growing

Operator

Silverstein next from with comes ahead. Our question go Please Josh Wolfe.

Josh Silverstein

why about wondering some where are on just it's to you bullish year hedges philosophically downside, next the the for price protect curve. like next But for gas some to $X.X just We in not in natural start year. layer of

plenty year, free Next at of flow get cash that can level. you guys

just not just layering in why at start So amount? an least incremental

Dan Dinges

great much point yeah, our And question, Well, Josh. hedge discussion committee.

focused time we are which summer recently We not have some on met number done where protecting and with hedges. the and only of we've months,

had talked significant yesterday, about also like we program, the our hedge market about the to we meeting discussion We XXXX today amount would of think that and Board considerable detail. protect, we is where what

Hutton we think market talked go. the Board where the presented And marketing to might about Jeff outlook and the

a is think the and this looking And at will do. we what ahead we so it market and stage consideration, Josh,

in actually We're that pleased XXXX. very unhedged we're

and to we're think where of where when to couch in we in we're to take I consideration going it to go hedges continue might - We'll that the the to as and able offensive hedges also do placed market XXXX do that be forward looking it. think we anticipate hedges. currently we it think is I layer

a position. your even And about our prices. and just strip understand anticipated prices, program what table lot prices a discussion just with we of these strip maintenance I So Board current deliver around again, with

Josh Silverstein

Got you.

hold you year? the next Do and around Henry that. go occur region guys? just true $X.XX And probably that your for $X.XX. a think Okay. up about a year, to Hub the would $X to up you the in to loosened has maybe that that in higher guidance should the we think $X.XX as How bit. This would price we little Northeast capacity follow-up differential is Obviously, try to

to can and any how move to sense as this relative differentials So year? -

Dan Dinges

now dips realizations, and our quick on and where to this But him are would with let our focused is, might right plus here make even a like higher the always the where Jeff, good you $X.XX Jeff comment in it, I'll feel outlined or about a you this. price. good But, and Yes, feel minus turn forecast, to comment. pretty we which on I the about go from dips make the

Jeffrey Hutton

of on frankly, very We're fall the and Jeff ice at Josh, line the the differentials. expectations outlook course, that, Yes. is for we've seen quite differentials. to looking Hutton. with with been our this differentials the basis And in basis daily current pleased

we if widening total far might anything, so the $X area, the are that cents if - the company. think and But on strip a see hopeful the upward I for current differential outlook move $X.XX is which for few see not a at the the you differentials. far with we from too off into

Operator

will Our Sachs. Goldman Brian from question come Please with next ahead. Singer go

Brian Singer

assets, lot can on thoughts in your wanted a stressed sale see Can structure, your there us strong if sheet, your balance to consolidation. of a none come up There's for maintenance diversifying bit latest Appalachia give if touch the versus a on they open scale flow risk-reward cost already. You've highlighted of out the cash could latest could levels. thoughts low healthy you above? over on like aren't I versus companies year you that at gaining little next the of

Dan Dinges

Yes, the ongoing. conversation is M&A

with and aware consolidate, the meeting. said past, healthy. our it's the a It time - the associated Board market, position needs difficult at is Brian, that a session have our long Appalachia The significant think, and on we the levels every peers. I debt that difficult consolidation I've been you're conversation still time to we and Board grind debt for the totally would load is part The that at As load. executive part in it, debt our be each

been is these a extremely combination, us. it will, such a a for cap makes particularly It's percentage through some have we've difficult what all you of we And going loss The in good the companies. through market equity asset. this of think large compared has to that debt carnage - if just analysis, an we

the of cognizant combination. dilution are that a We fact occur with any might of

to line - you comes schedule would if company load each up take. has XX- And And that if some some that comes debt but acreage, not prepared has that not drilling good in acreage for a each with maybe it it acreage that plus we're year. company with our

and up. the as quality I expectations always for around might also meeting I'm on So If be. Cabot It's shareholders difficult. at that hard we dance the years done for to for there years it years, get so to could not levels. made quality and Brian. fit it's sellers But difficult, were why look the one reason and things we've assets and think and expectations that what sense, I makes would lined But valuation versus its but down years always it's a our drop number question, it if trying put debt what

Brian Singer

Upper Marcellus. totally Great. understand. to Thank the regards I is you. My follow-up with

since all Upper it You Lower But any in update provided there versus update long that performance just and then. been an last on that know I if call, well is on on Marcellus? your hasn't wonder

Dan Dinges

as Marcellus quick be the going you know, here I'll to that layer in the remain five where wells able a our Upper. we is in We program on make year. Upper these out. let we operational only Phil our given this might is, lay the Upper on wells several - when plan scheduled location as a comment of performance it where Marcellus program Stalnaker But pad fits in we'll to have

the at looking again, and on Marcellus programming us to lateral the at what a partially you it say, extended you today, that's information drill of out and just performance some the looking in would the program Phil, well. that if Upper like our, with Upper One length part would X,XXX-plus to expansive with they're be and Phil's of drilled, to I'll trying comment of Upper way longer development it or a make very to Marcellus, kind our to to we'd Phil, allow minus over even program. of a but of in develop we're then laterals turn laterals Marcellus the seeing Upper is I'd Marcellus tidbit for and looking lay compared

Phillip Stalnaker

laying said, the what we're on of year. possible this no there out slate we up to The as Again, future Dan. economic length Upper the end as are pretty then a change much Phil the Marcellus Yes, with been forward. this out into longer in and is out planned, a have going pleased last from Again, predicted and as laterals blank Stalnaker. looking what to optimal we really really, at lateral as laid that the And being point. performing that wells as Dan

So well. going everything is

Operator

will Please question Jeffrey from go ahead. next Brothers. come Tuohy Campbell Our with

Jeffrey Campbell

Good in quarter. a performance morning and congratulations on tough the

Dan Dinges

Jeffrey. Thank you,

Jeffrey Campbell

You Is XXXX? bet. look nat markets, closer gas the In tough dynamics your has it selling ability in better increased to to to its home. Do sell its different? environment price former Cabot any moving

Dan Dinges

Yes, that. I the a good Jeffrey. is Jeff? his on edge it's seat know sitting answer of Jeff to Hutton question, And

Jeffrey Hutton

Okay. Good Jeffrey. Yeah. morning,

have successful moving supply we getting As mentioned, and the down Jersey. D.C. Atlantic in-basin markets to Sunrise New some - - over also you been better the years our into and different up outlets, as to to we particularly area and of into over the with

miscellaneous years up woods. in two typical that the that we've we've again the in-basin demand in-basin the able power of to customers, couple picked over neck are last prices in-basin and with the With been that supplier the exceed some of plants

much But they this very very our XXXX, historically. realization higher environment, better pricing and supply see encouraging out to with what in pricing a close one as it's that in-basin poor into differentials that see going are being we and receive is than to

Jeffrey Campbell

lower That's What activity. do the optimism XXXX particularly for oil you you. from period gas it. Thanks. is to and COVID-XX? on of about other Thank lot XXXX, a helpful. question My think be seems demand for based Okay. supply Got from in recovery very a

Dan Dinges

And to in shut-ins, gas, reduction here Yes. the associated frac forward holidays, And question, in thanks lower a constructive flip Jeffrey. the and feel the supply to all second. supply. Jeff certainly for - allocation the But the the like reduce it reduction I'll looking at going are we're capital

We going Bcf between kind we in there. the to loss, outlook make wisdom reduction somewhere X now. day with seen and a supply is coming in to numbers supply, prior on the conventional both. and of Jeff we've healthy be right feel it's I'll XX let Bcf And about are good demand reduction And out his of to comment this demand pandemic pretty some actually through seeing on start probably the

Jeffrey Hutton

the Yes, Jeffrey, today the as though the and the and that seen, we is. is that virus a are the lot as you be - reason mentioned, find local destruction positive of to is need that a I trading here of the will demand way there situation ourselves it say result strip another we've troubling. considered

at the bit secret. of X.X commercial anywhere to As we view, would But us residential, the normally seen, enter look it see expect we've But month do X Bcf was the day. no down you leave as instruction, and industrial shoulder larger seeing also Bcf we the months, shoulder demand from shortly. are with little demand we power side. as macro a That's we to

But We to expect positive during industrial QX. pick on side, we've here just the Mexico. on hit most exports record a demand to up

very export delayed. averages are capacity, few of there yes, X believe back But day. maybe to at look the been year, this close in LNG a side, cargos a you LNG the on then And least as has Bcf excess I

in that are of that exports of the and is to So the but slump out encouraging. steps LNG very been slump economy, Mexican the fact a taking resiliency we've with and get

X, picture cetera, a on decline, et XXXX. X, in Dan good the Bcf supply macro supply of with time the think point pretty reduction described this that price and possibility paints holidays in I from view, day XX So a a year-over-year a for

Operator

for back I over our closing the to question-and-answer concludes to like remarks. Dan This any Dinges session. turn conference would

Dan Dinges

is Well, I know everybody slow in this to And trying appreciate get everybody today. period. I calling through

almost of continue been and I through Cabot think have able this is difficult forward team And to us. that period flawlessly it's we to watch very period. execute the going we're to efficiency be ahead our the wonderful to of looking

Thank to forward call next quarter. look So you. the

Operator

now concluded. The attending conference for you Thank has presentation. today's

may You disconnect. now

Coterra Energy (CTRA) 1 May 202020 Q1 Earnings call transcript