Cabot Oil & Gas Swings into Second-Quarter Loss on Natural Gas Prices, Maintains $900 Million Capex for 2015

Researched by Industrial Info Resources (Sugar Land, Texas)--Hit by falling prices, Marcellus and Eagle Ford natural gas producer Cabot Oil & Gas Corporation (NYSE:COG) (Houston, Texas) reported it swung to a $14 million net loss in second-quarter 2015, from a $118.4 million profit in the same quarter last year. However, Cabot executives say better times are ahead after the company weathers the current price trough and key pipeline projects are brought online.

Industrial Info is tracking Cabot's shale gas lease drilling programs for 2015 and 2016 in Susquehanna County, Pennsylvania, which have a combined value of $400 million. The program for each year includes drilling 75 to 100 natural gas production wells, with a total production capacity of 1.2 billion cubic feet per day.

The company maintained its capital expenditure (capex) guidance for the year at $900 million. Cabot operates three rigs in the Marcellus Shale and one rig in the Eagle Ford Shale; the company plans to remain at this level for the remainder of the year, according to executives.

Cabot Chief Executive Officer Dan Dinges said during the company's earnings conference call that excluding the effect of selected items, including a $36.5 million after-tax, non-cash, mark-to-market loss on natural gas derivatives, net income for the quarter was $14.6 million. The average produced gas sales price was $2.15 per thousand cubic feet during the quarter, compared with $3.47 in the same quarter of the prior year.

Operating revenues for the quarter totaled more than $306 million, down 43% from $533 million a year earlier.

The company's overall equivalent production in the second quarter was higher than in the same quarter of 2014, Dinges said, despite the company's decision to curtail its Marcellus gross production volumes by 500 million cubic feet per day (cfd) due to low prices. Production in the second quarter this year was 138 billion cubic feet equivalent (cfe), including natural gas and liquids. Dinges said he expects equivalent production to grow 10% to 18% for the year.

Dinges voiced optimism despite the current state of the natural gas market: "We will continue to be patient as we anticipate a better opportunity to move additional volumes in the local market."

Dinges said he anticipates construction will begin this fall on the Constitution pipeline, with completion in the second half of 2016. The 124-mile pipeline will carry up to 650 million standard cubic feet per day of natural gas from northeastern Pennsylvania to New York and New England. Constitution Pipeline Company LLC is owned by subsidiaries of Cabot, Williams Partners LP (NYSE:WPZ) (Tulsa, Oklahoma), Piedmont Natural Gas Company (NYSE:PNY) (Charlotte, North Carolina) and WGL Holdings Incorporated (NYSE:WGL) (Washington, D.C.).

He added: "We firmly believe that stronger demand and improved price realization are on the horizon for Cabot, and we will continue to be disciplined as we manage our way through this lower-price environment as we have through all commodity cycles."

For related information, see April 27, 2015, article - Cabot Oil & Gas Keeps Production Going in Marcellus, Eagle Ford Amid Weak Prices, Sets 2015 Capex at $900 Million.

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