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3Q15 Earnings: Cabot Oil and Gas’s Revenue Missed Estimates

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Cabot Oil and Gas’s revenue

On October 23, Cabot Oil & Gas (COG) announced earnings for 3Q15, ended September 30. The company announced adjusted revenue of ~$305 million, versus a consensus or Wall Street analysts’ estimate of ~$352 million. The company’s revenue in the previous quarter had also missed analysts’ estimates, as the graph below notes.

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Revenue analysis

The company’s revenue fell ~40.4% year-over-year. Compared to 2Q15, revenue was almost the same. As we can see in the graph above, Cabot Oil & Gas’s revenue has significantly fallen in 2015, compared to the previous quarters. As we noted in the previous part, this is because of a reduction in realized prices of natural gas and crude oil. Crude oil prices have fallen ~24% YTD, or year-to-date, while natural gas has fallen ~34% YTD. The company is predominantly a natural gas producer.

In the third quarter, natural gas prices fell ~9.3%, meaning lower realized prices, while prices had actually risen in the second quarter by ~8.7%, indicating higher realized prices in 2Q15. It’s interesting to note that revenue remained the same in the third quarter compared to the second quarter, despite a drop in natural gas prices. The reason for this is rising production in 3Q15. We’ll look at that production in the next part.

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Peer comparison

Southwestern Energy (SWN) announced earnings on October 22. It reported an adjusted revenue of $749 million against an estimate of $805.5 million.

Antero Resources (AR) and Range Resources (RRC) are yet to announce their 3Q15 earnings. Analysts expect their respective revenues to come in at $533 million and $398 million.

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

What drove Cabot Oil & Gas’s performance?

On the earnings call, Dan Dinges, the company’s Chairman, President, and CEO noted that the overall weaker financial metrics in the third quarter were a result of lower realized natural gas and oil prices, as they fell by 34% and 52%, respectively, compared to 3Q14.

Next, we’ll take a closer look at realized prices and operational performance in the third quarter.

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