Cabot Oil & Gas Leaps On Earnings

Michael Teague  |

Cabot Oil & Gas Corporation (COG) released an impressive earnings report after Wednesday’s closing bell that has sent the stock up over 7 percent to a new all-time high of $78.07 in intraday trading.

A $15 billion dollar company and one of the world’s top independent oil and gas firms, Cabot reported that for the second quarter of 2013, net income excluding items came in at $95 million, or $0.45 per share on revenues of $450 million, compared to the prior year period during which the company netted $10 million, or $0.05 per share on revenue of $139.4 million. This significant year-over-year increase was also ahead of estimates for the recently ended quarter which had the company earning $0.38 per share on revenue of $426 million.

The results are in keeping with the kind of year that Cabot has had, as the stock is up over 44 percent in 2013, and has advanced over 78 percent over the past 12 months. Simultaneous to the earnings release, the company announced that it would be adding a sixth rig in the Marcellus Shale bedrock that lies beneath swathes of New York, New Jersey, and Pennsylvania. The company is already producing 1.2 billion cubic feet of natural gas from over 200 wells in the Marcellus Shale, and while the new rig will not impact 2013 production, Cabot says that the project is ahead of schedule and will play into next year’s figures.

The timing of the press release and the release of earnings was certainly not accidental, as the company’s Q2 performance was in large part due to a substantial ramp-up in production and drilling. The 95.2 billion cubic feet of natural gas produced during the period is more than double what the company produced during the prior year period, a gain that the company attributed to production growth in the Appalachian region, where natural gas volume grew 63 percent.

The dramatic increase in production was accompanied by an 11.7 percent increase in operating expenses to $285 million. At the same time, the company made up for this to some extent with a 72 percent decrease in exploration costs, $4.5 million for Q2 2013.

Natural gas prices have been falling amid a surplus of production in the US, but Cabot has managed to circumvent this by increasing production consistently, and there seems to be no sign of a slowdown. The company upped its previous guidance of 130-145 net wells drilled for the full year 2013 to 155 to 165 net wells drilled, part of which is an increase in the estimates of wells drilled in the Marcellus Shale to a range of 85 to 100.

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