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Cabot (COG) Misses Q2 Earnings, Beats Revenue Estimates

Domestic energy explorer Cabot Oil & Gas Corporation COG reported second-quarter 2017 earnings per share – adjusted for special items – of 14 cents, missing the Zacks Consensus Estimate of 15 cents on increased costs. However, it compares favorably with the year-ago quarter’s adjusted loss of 7 cents.

Results were driven by improvement in the commodity pricing environment which in turn led to higher realized natural gas prices.

Houston, TX-based Cabot’s quarterly revenues improved 86.5% year over year to $460.5 million and was marginally above the Zacks Consensus Estimate of $459 million.

Cabot Oil & Gas Corporation Price, Consensus and EPS Surprise

 

Volume Analysis

Cabot’s overall production during the quarter totaled 173.1 billion cubic feet equivalent (Bcfe) – 96% gas – up 14% from the prior-year quarter volume of 151.8 Bcfe. Natural gas output was 166.2 Billion cubic feet (Bcf), while crude oil production came in at 1,014.2 thousand barrels (MBbl) and natural gas liquids came at 132.4 thousand barrels (MBbl).

Realized Prices

The average realized natural gas price improved 46% from the year-ago quarter to $2.38 per thousand cubic feet, while average crude/condensate price realization rose 11.6% to $44.96 per barrel. Meanwhile, natural gas liquids fetched $16.59 per barrel, an increase of 33.5% compared with second-quarter 2016.

Costs & Expenses

Total operating expenses were 26.6% higher than second-quarter 2016, rising to $400.3 million. In particular transportation and gathering expenses were up 12% to $15.4 million. Further, Cabot’s exploration, general /administrative and impairment charges also increased. These were partly offset by reduced depreciation costs in the reported quarter when compared with the prior-year figure.

Drilling Statistics, Capital Expenditure & Balance Sheet

Cabot drilled 21.1 net wells and completed 24 during the quarter. Operating cash flows were $260.6 million for the quarter compared with $85.2 million in the prior-year quarter. Capital expenditures totaled $185 million (up 176.9%). As of Jun 30, 2017, the company had $516.5 million in cash and $1,521.2 million in long-term debt with a debt-to-capitalization ratio of 36.5%.

Guidance update

The company projects net production of 1,750 to 1,800 million cubic feet per day for natural gas, 13,000 to 13,750 barrels per day for crude oil and condensate and 1,350 to 1,450 barrels per day for NGLs.

Capex for 2017 is estimated at $845 million, which comprises $775 million of exploration and production spending and $70 million of contributions to its equity pipeline investments.

Zacks Rank & Key Picks

Cabot is an independent oil and gas exploration company with producing properties mainly in the continental U.S. Cabot focuses on high-impact natural gas-focused drilling in the Marcellus Shale and supplements it with Eagle Ford-based liquids program in Texas. The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked players from the broader energy space include Braskem S.A. BAK, Petróleo Brasileiro S.A. or Petrobras PBR and SeaDrill Limited SDRL. While Braskem and Petrobras sport a Zacks Rank #1 (Strong Buy), SeaDrill carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Braskem reported an average positive earnings surprise of 107.79% in the trailing four quarters.

Petrobras delivered an average positive earnings surprise of 59.58% in the last four quarters.

SeaDrill reported an average positive earnings surprise of 97.13% in the last four quarters.

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