Cabot’s net debt to EBITDA
Cabot Oil and Gas’s (COG) net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) was in the range of 1x to 3x between 1Q13 and 4Q14. However, in 2015, its net-debt-to-EBITDA multiple shot up, mostly because of a significant drop in its EBITDA due to lower commodity prices.
COG’s 3Q15 net-debt-to-EBITDA multiple was ~13x. A rising net debt since 3Q14 and a rapid decline in its EBITDA in the same period pushed the multiple higher. COG’s 3Q15 net debt was ~$2 billion. Its trailing-12-month EBITDA as of 3Q15 was just $156 million. A year ago, in 3Q14, net debt stood at $1.3 billion and the trailing-12-month EBITDA as of 3Q14 was a much higher $1.3 billion.
Peer group comparison
Other upstream companies like Devon Energy (DVN), Hess (HES), and ConocoPhillips (COP) have also seen lower EBITDA levels this year compared to 2014 due to lower crude oil prices. These companies’ respective 3Q15 EBITDAs for the trailing 12 months have fallen ~20%, ~60%, and ~67%, respectively, compared to 3Q14. These companies combined make up ~8% of the Energy Select Sector SPDR ETF (XLE).
For an in-depth analysis of Hess, read Market Realist’s Outlook for Hess.
Cabot’s liquidity and financial position
COG noted that as of 3Q15, its net debt to adjusted capitalization ratio was 48.9% compared to 44.7% as of December 31, 2014. Total capital is made up of a company’s debt and shareholder equity. A higher ratio indicates reduced financial flexibility. The company’s total debt as of 3Q15 was $2,037 million, of which $425 million was outstanding under its $1.8 billion revolving credit facility.