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3Q15 Earnings: Cabot Oil and Gas’s Operational Performance

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Cabot Oil and Gas’s operational performance

Cabot Oil & Gas Corporation’s (COG) net production in 3Q15 was ~142.1 billion cubic feet equivalent (or Bcfe), ~7.3% higher than it was a year ago, and ~3% higher than the previous quarter. Of this production, ~133 billion cubic feet (or Bcf) were in the form of natural gas. Liquids production, including crude oil, condensates, and natural gas liquids, accounted for 1.5 MMbbls, or million barrels.

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higher production volume

Year-to-date production volumes were 451.5 Bcfe, ~19% higher than the relative performance in the nine months ended September 30, 2014. For 2015, the company provided guidance for 12%–14% growth in total production. We’ll cover the guidance for 2015 and 2016 in a later part of this series.

The company’s realized prices

Natural gas price realizations, including the impact of derivatives or hedges, were $2.0 per Mcf (or thousand cubic feet) in 3Q15, or 34% lower when compared to 3Q14. Crude oil price realizations, including the impact of hedges, were $43.7 per barrel, or 52% lower when compared to 3Q14.

Year-to-date natural gas price realizations, including the impact of hedges, were $2.2 per Mcf, or 35% lower compared to the nine months ended September 30, 2014. Crude oil price realizations, including the impact of hedges, were $48 per barrel, ~51% lower compared to the nine months ended September 30, 2014.

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Regarding 2016’s price realizations, Dan Dinges, the company’s Chairman, President, and CEO, said on the earnings call, “We’re cautiously optimistic for an improvement in price realizations in 2016 due to the impact of new takeaway capacity coming online over the next few quarters on the demand side, and the impact of significant reduction in industry activity on the supply side.”

The company is predominantly a natural gas producer. Another gas-heavy producer that was hit by lower realized prices was Southwestern Energy (SWN). Southwestern Energy’s realized natural gas price was $2.2 per Mcf in 3Q15, compared to $3.4 in the corresponding quarter last year.

Cabot Oil & Gas’s peers include Antero Resources (AR) and Range Resources (RRC). These two companies are yet to release their 3Q15 earnings.

All the above companies make up ~1.3% of the iShares North American Natural Resources ETF (IGE).

Other operational updates from the company

Cabot Oil & Gas drilled or participated in a total of 27 net wells in 3Q15, and during this period, incurred capital expenditures of $150.5 million associated with these drilling activities.

Year-to-date, the company drilled or participated in a total of 105 net wells. During this period, it incurred capital expenditures of $676.9 million associated with these drilling activities.

Next, we’ll discuss the company’s segment-wise operational highlights.

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