Cabot Oil & Gas Reports Q3 Loss on Lower Realizations

The exploration and production firm reported loss per share – adjusted for special items – of 1 cent, underperforming the Zacks Consensus Estimate of breakeven and well below the year-ago profit of 20 cents.

Houston, TX-based Cabot’s quarterly revenue fell 40% year over year to $305.3 million and also missed the Zacks Consensus Estimate of $354 million.

Volume Analysis

Cabot’s overall production during the quarter totaled 142.1 billion cubic feet equivalent (Bcfe) – 94% gas – up 7% from the prior year quarter. Natural gas volumes increased 5% year over year to 133.0 Bcf, while liquids output jumped 57% to 1,513 thousand barrels (MBbl).

Realized Prices

The average realized natural gas price was down 34% from the corresponding period of 2014 to $2.02 per thousand cubic feet, while average oil price realization fell 54% to $43.71 per barrel.

Costs & Expenses

Total operating expenses were 3% lower than the third quarter of 2014, falling to $311.7 million. Though transportation and gathering costs were up 19% year over year to $102.1 million, exploration expenses declined 44% to $4.9 million. Moreover, Cabot’s depreciation, depletion and amortization expenses was down by 6% from the year-ago period to $144.3 million.

Drilling Statistics, Capital Expenditure & Balance Sheet

Net wells drilled during the quarter decreased to 27 (from 46 in the year-ago period) with a 100% success rate. Operating cash flows were $146.4 million for the quarter (down 59% year over year), while capital expenditures totaled $174.7 million (down 50%). As of Sep 30, 2015, the company had $2,037 million in long-term debt (including current portion), with a debt-to-capitalization ratio of 49.0%.

Company Guidance

Cabot expects to generate production growth of 12–14% for the full-year 2015. The company trimmed its capital expenditure guidance by $50 million to $850 million. For the fourth quarter, Cabot is looking to churn out 1,475-1,600 million cubic feet per day of natural gas and 14,000-15,500 barrels per day of liquids.

Cabot also provided a preliminary guidance for 2016, wherein it expects volume growth in the 2-10% range on a capital budget of $615 million.

Zacks Rank & Stock Picks

Cabot currently carries a Zacks Rank #3 (Hold).

Meanwhile, one can look at better-ranked players in the same industry like Apache Corp. APA, Matador Resources Co. MTDR and Oasis Petroleum Inc. OAS. All these stocks sport a Zacks Rank #2 (Buy).

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