UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 24, 2015
CABOT OIL & GAS CORPORATION
(Exact name of registrant as specified in its charter)
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| | | | |
Delaware | | 1-10447 | | 04-3072771 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
|
| | |
Three Memorial City Plaza | | |
840 Gessner Road, Suite 1400 | | |
Houston, Texas | | 77024 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (281) 589-4600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)
Item 2.02 Results of Operations and Financial Condition.
On April 24, 2015, we issued a press release with respect to our 2015 first quarter earnings. The press release is furnished as Exhibit 99.1 to this Current Report. The press release contains certain measures (discussed below) which may be deemed “non-GAAP financial measures” as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended. In each case, the most directly comparable GAAP financial measure and information reconciling the GAAP and non-GAAP measures is also included in the press release.
Exhibit 99.1 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
From time to time management discloses Discretionary Cash Flow, Net Income Excluding Selected Items, Earnings per Share Excluding Selected Items and Net Debt calculations and ratios. These non-GAAP financial measures, to the extent included in Exhibit 99.1, are reconciled to the most comparable GAAP financial measures in Exhibit 99.1.
Discretionary Cash Flow is defined as net income plus non-cash charges and dry hole expense. Discretionary Cash Flow is widely accepted as a financial indicator of an oil and gas company’s ability to generate cash which is used to internally fund exploration and development activities, pay dividends and service debt. Discretionary Cash Flow is presented based on management’s belief that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies that use the full cost method of accounting for oil and gas producing activities or have different financing and capital structures or tax rates. Discretionary Cash Flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating activities, as defined by GAAP, or as a measure of liquidity, or an alternative to net income.
Net Income Excluding Selected Items and Earnings per Share Excluding Selected Items are presented based on management’s belief that these non-GAAP measures enable a user of the financial information to understand the impact of these items on reported results. Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. Net Income and Earnings per Share Excluding Selected Items is not a measure of financial performance under GAAP and should not be considered as an alternative to net income and earnings per share, as defined by GAAP.
The total debt to total capitalization ratio is calculated by dividing total debt by the sum of total debt and total stockholders’ equity. This ratio is a measurement which is presented in our annual and interim filings and management believes this ratio is useful to investors in determining the Company’s leverage. Net Debt and the Net Debt to Total Capitalization ratio are non-GAAP measures which have been presented in Exhibit 99.1. Net Debt is calculated by subtracting cash and cash equivalents from total debt. Management believes that these measurements are also useful to investors since the Company has the ability to and may decide to use a portion of its cash and cash equivalents to retire debt. Additionally, as the Company may incur additional expenditures without increasing debt, it is appropriate to apply cash and cash equivalents to debt in calculating the Net Debt to Total Capitalization ratio.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release issued by Cabot Oil & Gas Corporation dated April 24, 2015
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | |
| CABOT OIL & GAS CORPORATION |
| |
| |
| By: | /s/ TODD M. ROEMER |
| | Todd M. Roemer |
| | Controller |
Date: April 24, 2015
EXHIBIT INDEX
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| | | |
99.1 |
| — | Press release issued by Cabot Oil & Gas Corporation dated April 24, 2015 |
Exhibit 99.1
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| | |
April 24, 2015 | | FOR MORE INFORMATION CONTACT |
| | Matt Kerin (281) 589-4642 |
Cabot Oil & Gas Corporation Announces First Quarter 2015 Financial and Operating Results,
Increases Borrowing Base and Amends Credit Facility
HOUSTON, April 24, 2015/PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) today reported its financial and operating results for the first quarter of 2015. Highlights for the quarter when compared to the first quarter of 2014 include:
| |
• | Production of 171.4 billion cubic feet equivalent (Bcfe), an increase of 43 percent |
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• | Liquids production (crude oil/condensate/natural gas liquids) of 1.6 million barrels (Mmbbls), an increase of 132 percent |
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• | Total unit costs (including financing) of $2.33 per thousand cubic feet equivalent (Mcfe), a 12 percent improvement |
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• | Total cash unit costs (including financing) of $1.22 per Mcfe, a 10 percent improvement |
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• | Subsequent to the end of the first quarter, the Company closed an amendment to its revolving credit facility that increased the borrowing base to $3.4 billion; increased the lenders' commitments to $1.8 billion; extended the maturity date three additional years; and reduced the drawn and undrawn pricing based on current leverage levels. As of the end of the first quarter, the Company had $265 million of borrowings outstanding under its revolving credit facility |
First Quarter 2015 Financial Results
Equivalent production in the first quarter of 2015 was 171.4 Bcfe, consisting of 161.8 billion cubic feet (Bcf) of natural gas and 1.6 Mmbbls of liquids. These figures represent increases of 43 percent, 40 percent, and 132 percent, respectively, compared to the first quarter of 2014. "Cabot delivered an impressive operational performance in the first quarter, highlighted by the 15 percent sequential growth in daily production volumes over the fourth quarter of last year,” commented Dan O. Dinges, Chairman, President, and Chief Executive Officer. “Our robust production levels were predicated on higher base-load volumes in the Marcellus during the quarter driven by increased seasonal demand and favorable natural gas sales contracts for the winter heating season; however, as we have communicated in the past, our plan is to reduce production levels beginning in the second quarter in response to the current environment throughout Appalachia.”
Cash flow from operations in the first quarter of 2015 was $267.4 million, compared to $255.4 million in the first quarter of 2014. Discretionary cash flow in the first quarter of 2015 was $240.2 million, compared to $319.5 million in the first quarter of 2014. Net income in the first quarter of 2015 was $40.3 million, or $0.10 per share, compared to $107.0 million, or $0.26 per share, in
the first quarter of 2014. Excluding the effect of selected items (detailed in the table below), net income was $49.2 million, or $0.12 per share, in the first quarter of 2015, compared to $109.7 million, or $0.26 per share, in the first quarter of 2014. Significant reductions in realized prices for both natural gas and oil were the primary drivers for the lower results in the quarter, partially offset by higher equivalent production.
Natural gas price realizations, including the effect of hedges, were $2.46 per thousand cubic feet (Mcf) in the first quarter of 2015, down 34 percent compared to the first quarter of 2014. Excluding the impact of hedges, natural gas price realizations for the quarter were $2.23 per Mcf, representing a $0.75 discount to NYMEX settlement prices compared to a $0.59 discount in the first quarter of 2014. Oil price realizations were $43.82 per barrel (Bbl), down 55 percent compared to the first quarter of 2014.
Total per unit costs (including financing) decreased to $2.33 per Mcfe in the first quarter of 2015, an improvement of 12 percent from $2.66 per Mcfe in the first quarter of 2014. All operating expense categories decreased on a per unit basis relative to last year’s comparable quarter except for transportation and gathering expense, which increased primarily as a result of slightly higher transportation rates and the commencement of various transportation and gathering agreements in the Marcellus Shale. Cash unit costs (including financing) decreased to $1.22 per Mcfe in the first quarter of 2015, an improvement of 10 percent from $1.35 per Mcfe in the first quarter of 2014.
Operational Highlights
Marcellus Shale
During the first quarter of 2015, the Company averaged 1,727 million cubic feet (Mmcf) per day of net Marcellus production, an increase of 43 percent over the prior year’s comparable quarter and a 16 percent sequential increase over the fourth quarter of 2014. These production levels were primarily the result of an average gross operated Marcellus production rate of 2,018 Mmcf per day during the first quarter. Cabot plans to reduce its average gross operated Marcellus volumes in the second quarter of 2015 to between 1,550 and 1,600 Mmcf per day as the Company monitors the supply and demand balance in Appalachia.
“While pricing pressure remains a challenge for Marcellus gas in the near-term, Cabot’s operating efficiencies in the play continue to exceed expectations,” noted Dinges. During the quarter, Cabot drilled 26 wells to total depth in the Marcellus Shale and averaged 15.0 drilling days for spud-to-rig release, representing the Company’s best quarter since inception of the program. Year-to-date, the Company’s Marcellus Shale program has realized a 15 to 20 percent decrease in drilling and completion costs as compared to the 2014 program.
Cabot is currently operating three rigs in the Marcellus Shale and plans to remain at this level for the remainder of the year.
Eagle Ford Shale
Cabot’s net production in the Eagle Ford Shale during the first quarter of 2015 was 17,831 barrels of oil equivalent (Boe) per day, an increase of 145 percent over the prior year’s comparable quarter. This included 17,017 barrels of liquids per day, an increase of 149 percent over the prior year’s comparable quarter. "Our daily Eagle Ford Shale liquids production increased 19 percent sequentially over the fourth quarter of last year, driven by strong performance from the 20 wells that were placed-on-production during the quarter including six wells that were located on the acreage we acquired in 2014," explained Dinges. “These six wells, in addition to four wells we placed on production during the fourth quarter, have outperformed the previous operators’ cumulative
oil production at 30, 60 and 90 days by over 50 percent on average, highlighting the value-enhancing proposition of these bolt-on acquisitions.”
Cabot’s Eagle Ford Shale program continues to realize significant improvements in operating efficiencies and cost savings. During the quarter, Cabot drilled 24 wells in the Eagle Ford Shale to total depth and averaged 10.6 drilling days for spud-to-rig release, a 25 percent reduction compared to the 2014 program. On the completions side, the Company averaged 6.4 completed frac stages per crew day during the first quarter of 2015, an increase from 5.5 completed frac stages per crew day for the 2014 program. Year-to-date, the Company’s Eagle Ford Shale program has realized a 20 to 30 percent decrease in drilling and completion costs as compared to the 2014 program.
Cabot is currently operating two rigs in the Eagle Ford Shale and plans to reduce to one rig by the end of May.
Financial Position and Liquidity
As of March 31, 2015, the Company's net debt to adjusted capitalization ratio was 46.1 percent, compared to 44.7 percent at December 31, 2014 (detailed in the table below). The Company's total debt was $1,877 million, of which $265 million was outstanding under the Company's revolving credit facility.
Effective April 17, 2015, Cabot closed an amendment to its revolving credit facility that provides for, among other things: an increase in the borrowing base from $3.1 billion to $3.4 billion; an increase in the lenders' commitments from $1.4 billion to $1.8 billion; an extension of the maturity date three additional years to 2020; and a reduction in the drawn and undrawn pricing based on current leverage levels. A total of 20 lenders participated in the Company’s facility.
Second Quarter and Full-Year 2015 Guidance
The Company has provided second quarter net production guidance of 1,375 to 1,425 Mmcf per day and 17,500 to 18,250 Bbls per day for natural gas and liquids, respectively. Cabot’s full-year production growth guidance range of 10 to 18 percent remains unchanged. The Company expects its natural gas price realizations before the impact of hedges to average between $0.82 and $0.92 below NYMEX settlement prices for the second quarter.
Cabot’s 2015 capital program remains unchanged at $900 million. As a result of a higher rig count and more completion activity during the first half of 2015, the Company estimates approximately 65 percent of its capital budget will be incurred in the first half of the year with the remaining 35 percent to be spent evenly between the third and fourth quarters.
For further disclosure on Cabot’s natural gas pricing exposure by index for the second quarter of 2015 and updated unit cost guidance, please see the current Guidance slide in the Investor Relations section of the Company’s website.
Conference Call
A conference call is scheduled for Friday, April 24, 2015, at 9:30 a.m. Eastern Time to discuss first quarter 2015 financial and operating results. To access the live audio webcast, please visit the Investor Relations section of the Company's website at www.cabotog.com. A replay of the call will also be available on the Company's website. The latest financial guidance, including the Company's hedge positions, is also available in the Investor Relations section of the Company's website.
Cabot Oil & Gas Corporation, headquartered in Houston, Texas is a leading independent natural gas producer, with its entire resource base located in the continental United States. For additional information, visit the Company's 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.
FOR MORE INFORMATION CONTACT
Matt Kerin (281) 589-4642
OPERATING DATA
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| | | | | | | |
| Three Months Ended
March 31, |
| 2015 | | 2014 |
PRODUCED NATURAL GAS (Bcf) & LIQUIDS (Mbbl) | | | |
Natural Gas | | | |
Appalachia | 159.0 |
| | 112.8 |
|
Other | 2.8 |
| | 3.0 |
|
Total | 161.8 |
| | 115.8 |
|
| | | |
Crude/Condensate/NGL | 1,594 |
| | 686 |
|
| | | |
Equivalent Production (Bcfe) | 171.4 |
| | 119.9 |
|
| | | |
PRICES(1) | | | |
Average Produced Gas Sales Price ($/Mcf) | | | |
Appalachia | $ | 2.45 |
| | $ | 3.71 |
|
Other | $ | 2.98 |
| | $ | 4.97 |
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Total | $ | 2.46 |
| | $ | 3.74 |
|
| | | |
Average Crude/Condensate Price ($/Bbl) | $ | 43.82 |
| | $ | 97.76 |
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| | | |
WELLS DRILLED | | | |
Gross | 43 |
| | 27 |
|
Net | 42 |
| | 27 |
|
Gross success rate | 100 | % | | 100 | % |
(1) These realized prices include the realized impact of derivative instrument settlements.
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| | | | | | | |
| Three Months Ended
March 31, |
| 2015 | | 2014 |
Realized Impacts to Gas Pricing | $ | 0.23 |
| | $ | (0.61 | ) |
Realized Impacts to Oil Pricing | $ | — |
| | $ | (0.36 | ) |
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
|
| | | | | | | |
| Three Months Ended
March 31, |
| 2015 | | 2014 |
OPERATING REVENUES | |
| | |
|
Natural gas | $ | 360,191 |
| | $ | 432,809 |
|
Crude oil and condensate | 62,558 |
| | 59,144 |
|
Gain (loss) on derivative instruments | 34,123 |
| | — |
|
Brokered natural gas | 4,827 |
| | 13,153 |
|
Other | 3,066 |
| | 4,697 |
|
| 464,765 |
| | 509,803 |
|
OPERATING EXPENSES | |
| | |
|
Direct operations | 36,017 |
| | 35,834 |
|
Transportation and gathering | 121,235 |
| | 77,765 |
|
Brokered natural gas | 3,739 |
| | 11,860 |
|
Taxes other than income | 11,280 |
| | 13,044 |
|
Exploration | 8,732 |
| | 6,474 |
|
Depreciation, depletion and amortization | 175,497 |
| | 147,418 |
|
General and administrative (excluding stock-based compensation) | 16,619 |
| | 18,465 |
|
Stock-based compensation(1) | 5,910 |
| | 3,171 |
|
| 379,029 |
| | 314,031 |
|
Earnings (loss) on equity method investments | 1,421 |
| | — |
|
Gain (loss) on sale of assets | 138 |
| | (1,285 | ) |
INCOME FROM OPERATIONS | 87,295 |
| | 194,487 |
|
Interest expense | 23,566 |
| | 16,557 |
|
Income before income taxes | 63,729 |
| | 177,930 |
|
Income tax expense | 23,474 |
| | 70,899 |
|
NET INCOME | $ | 40,255 |
| | $ | 107,031 |
|
Earnings per share - Basic | $ | 0.10 |
| | $ | 0.26 |
|
Weighted average common shares outstanding | 413,344 |
| | 416,900 |
|
(1) Includes the impact of the Company’s performance share awards, restricted stock, stock appreciation rights and expense associated with the Supplemental Employee Incentive Plan.
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands) |
| | | | | | | |
| March 31,
2015 | | December 31,
2014 |
Assets | |
| | |
|
Current assets | $ | 349,403 |
| | $ | 413,447 |
|
Properties and equipment, net (Successful efforts method) | 5,058,804 |
| | 4,925,711 |
|
Other assets | 104,116 |
| | 98,558 |
|
Total assets | $ | 5,512,323 |
| | $ | 5,437,716 |
|
| | | |
Liabilities and Stockholders’ Equity | |
| | |
|
Current liabilities | $ | 402,746 |
| | $ | 499,018 |
|
Long-term debt | 1,877,000 |
| | 1,752,000 |
|
Deferred income taxes | 851,649 |
| | 843,876 |
|
Other liabilities | 205,397 |
| | 200,089 |
|
Stockholders’ equity | 2,175,531 |
| | 2,142,733 |
|
Total liabilities and stockholders’ equity | $ | 5,512,323 |
| | $ | 5,437,716 |
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands)
|
| | | | | | | |
| Three Months Ended
March 31, |
| 2015 | | 2014 |
Cash Flows From Operating Activities | |
| | |
|
Net income | $ | 40,255 |
| | $ | 107,031 |
|
Deferred income tax expense | 15,081 |
| | 57,603 |
|
(Gain) loss on sale of assets | (138 | ) | | 1,285 |
|
Exploration expense | 162 |
| | 2,040 |
|
(Gain) loss on derivative instruments | 3,562 |
| | — |
|
Income charges not requiring cash | 181,254 |
| | 151,573 |
|
Changes in assets and liabilities | 27,205 |
| | (64,154 | ) |
Net cash provided by operations | 267,381 |
| | 255,378 |
|
| | | |
Cash Flows From Investing Activities | |
| | |
|
Capital expenditures | (395,242 | ) | | (338,701 | ) |
Proceeds from sale of assets | 3,081 |
| | 108 |
|
Restricted cash | — |
| | 8,382 |
|
Investment in equity method investments | (5,078 | ) | | (5,937 | ) |
Net cash used in investing | (397,239 | ) | | (336,148 | ) |
| | | |
Cash Flows From Financing Activities | |
| | |
|
Net increase (decrease) in debt | 125,000 |
| | 75,000 |
|
Dividends paid | (8,263 | ) | | (8,332 | ) |
Stock-based compensation tax benefit | 3,437 |
| | 16,043 |
|
Other | 2,678 |
| | 90 |
|
Net cash provided by financing | 122,852 |
| | 82,801 |
|
| | | |
Net (decrease) increase in cash and cash equivalents | $ | (7,006 | ) | | $ | 2,031 |
|
Selected Item Review and Reconciliation of Net Income and Earnings Per Share
(In thousands, except per share amounts) |
| | | | | | | |
| Three Months Ended
March 31, |
| 2015 | | 2014 |
As reported - net income | $ | 40,255 |
| | $ | 107,031 |
|
Reversal of selected items, net of tax: | |
| | |
|
(Gain) loss on sale of assets | (87 | ) | | 775 |
|
(Gain) loss on derivative instruments (1) | 2,246 |
| | — |
|
Drilling Rig Termination Fees | 3,059 |
| | — |
|
Stock-based compensation expense | 3,726 |
| | 1,913 |
|
Net income excluding selected items | $ | 49,199 |
| | $ | 109,719 |
|
As reported - earnings per share | $ | 0.10 |
| | $ | 0.26 |
|
Per share impact of reversing selected items | 0.02 |
| | — |
|
Earnings per share including reversal of selected items | $ | 0.12 |
| | $ | 0.26 |
|
Weighted average common shares outstanding | 413,344 |
| | 416,900 |
|
(1) Effective April 1, 2014, the Company elected to discontinue hedge accounting for its commodity derivatives on a prospective basis. This amount represents the non-cash mark-to-market changes of our commodity derivative instruments recorded in gain (loss) on derivative instruments in the Condensed Consolidated Statement of Operations.
Discretionary Cash Flow Calculation and Reconciliation
(In thousands) |
| | | | | | | |
| Three Months Ended
March 31, |
| 2015 | | 2014 |
Discretionary Cash Flow | |
| | |
|
As reported - net income | $ | 40,255 |
| | $ | 107,031 |
|
Plus (less): | |
| | |
|
Deferred income tax expense | 15,081 |
| | 57,603 |
|
(Gain) loss on sale of assets | (138 | ) | | 1,285 |
|
Exploration expense | 162 |
| | 2,040 |
|
(Gain) loss on derivative instruments | 3,562 |
| | — |
|
Income charges not requiring cash | 181,254 |
| | 151,573 |
|
Discretionary Cash Flow | 240,176 |
| | 319,532 |
|
Changes in assets and liabilities | 27,205 |
| | (64,154 | ) |
Net cash provided by operations | $ | 267,381 |
| | $ | 255,378 |
|
Net Debt Reconciliation
(In thousands) |
| | | | | | | |
| March 31,
2015 | | December 31,
2014 |
Long-term debt | $ | 1,877,000 |
| | $ | 1,752,000 |
|
Stockholders’ equity | 2,175,531 |
| | 2,142,733 |
|
Total Capitalization | $ | 4,052,531 |
| | $ | 3,894,733 |
|
| | | |
Total debt | $ | 1,877,000 |
| | $ | 1,752,000 |
|
Less: Cash and cash equivalents | (13,948 | ) | | (20,954 | ) |
Net Debt | $ | 1,863,052 |
| | $ | 1,731,046 |
|
| | | |
Net debt | $ | 1,863,052 |
| | $ | 1,731,046 |
|
Stockholders’ equity | 2,175,531 |
| | 2,142,733 |
|
Total Adjusted Capitalization | $ | 4,038,583 |
| | $ | 3,873,779 |
|
| | | |
Total debt to total capitalization ratio | 46.3 | % | | 45.0 | % |
Less: Impact of cash and cash equivalents | 0.2 | % | | 0.3 | % |
Net Debt to Adjusted Capitalization Ratio | 46.1 | % | | 44.7 | % |
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