Cabot Oil & Gas Corporation COG reported second-quarter 2018 earnings per share — adjusted for special items — of 13 cents, surpassing the Zacks Consensus Estimate of 19 cents. The weaker-than-expected results can be attributed to lower-than-anticipated realized gas prices (including the impact of derivates). Precisely, average realized gas price came in at $2.15 per thousand cubic feet (Mcf), lagging the Zacks Consensus Estimate of $2.17 per Mcf. Moreover, the bottom line was marginally lower than earnings of 14 cents in the year-earlier quarter.
The company’s quarterly revenues of $453.4 million outpaced the Zacks Consensus Estimate of $376 million. Further, the reported figure was below the prior-year quarter’s revenues of $460.5 million, primarily due to lower gas prices.
Cabot Oil & Gas Corporation Price, Consensus and EPS Surprise
Cabot Oil & Gas Corporation Price, Consensus and EPS Surprise | Cabot Oil & Gas Corporation Quote
Volume Analysis
In the quarter under review, Cabot’s overall production totaled 172.4 billion cubic feet equivalent (Bcfe), marginally lower than the prior-year quarter volume of 173.1 Bcfe. With the divestment of Eagle Ford Shale holdings, the entire production was composed of natural gas.
Net production from the company’s Marcellus Shale in the first quarter totaled 1,891 million cubic feet (Mmcf) per day, up 4% on a sequential basis. At present, the company has three rigs and two completion crews operating in the prolific Marcellus Shale.
Realized Prices
Average realized natural gas price (excluding hedges) fell to $2.11 from the year-ago quarter to $2.38 per thousand cubic feet.
Costs & Expenses
Total operating expenses were 6.5% lower than the second quarter of 2017, declining to $375.9 million. While transportation and gathering costs were down 5.3% year over year to $114.2 million, depreciation, depletion and amortization expenses decreased 41.2% from the year-ago period to $84.9 million.
Drilling Statistics, Capital Expenditures & Balance Sheet
Cabot drilled 24 wells and completed 23 during the quarter. While operating cash flows were $273.9 million (up 5.1% year over year), capital expenditures totaled $231. million (up 24.9%). As of Jun 30, 2018, the company had cash and cash equivalents of $741 million and long-term debt (including current portion) of $1,218.5 million, with a debt-to-capitalization ratio of 36.1%.
Dividend
On Jul 26, the board of directors announced a dividend payout of 6 cents per share, payable on Aug 23 to shareholders of record as of Aug 9.
Share Repurchase Program
Through the second quarter, the company bought back 11.6 million shares at a weighted average share price of $23.54. Bringing in pleasant news for investors, Cabot declared its plans to boost its share buyback program by 20 million shares.
Guidance
For the third quarter, Cabot Oil and Gas expects net production in the range of 2,100-2,200 million cubic feet equivalent a day. For 2018, the company updated its daily production growth guidance from 10-15% to 10-12%. It now plans a capital budget of $960 million for 2018 versus prior capex of $950 million.
Zacks Rank and Stocks to Consider
Currently, Cabot carries a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space are ConocoPhillips COP, China Petroleum and Chemical Corporation SNP, also known as Sinopec, and CVR Refining, LP CVRR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ConocoPhillips, based in Houston, TX, is a major global exploration and production (E&P) company. It pulled off an average positive earnings surprise of 226.9% in the last four quarters.
Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the trailing four quarters.
Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the last four quarters.
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